What Is the Alternative Minimum Tax?

Every year more taxpayers must come to terms with the alternative minimum tax (AMT).

The AMT is a parallel tax system that operates in the shadow of the regular tax. It was designed to prevent the use of excessive tax breaks, after Congress, in 1969, noticed 155 high-income earners were legally using so many deductions that they were paying much less tax than lower-income classes.

So Congress instituted an "alternative" tax system with the aim of making tax collecting fairer. But since the AMT was never indexed to inflation -- and the regular income tax is -- each year, more and more middle-income taxpayers are snared by a tax originally targeted at the rich.

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