Will I be in alternative minimum tax (AMT)?

The AMT tax is not just for the wealthy anymore. AMT has been around since 1969 and the effects of inflation have outpaced the calculation's original intent. There has been a continued effort over time by various administrations to remedy this situation. However, all previous attempts to make the AMT serve the purpose for which it was originally intended have failed.

According to the Tax Policy Center, the number of taxpayers nabbed by AMT will jump from 4 million in 2009 to 27 million for tax year 2010, and could affect 37 million taxpayers by 2020. Congress enacted a temporary AMT "patch" for 2009, but so far there is no "patch" for 2010 and beyond.

The hardest hit are married couples with children who take a lot of the deductions and credits that are disallowed under AMT. The Tax Policy Center estimates that in 2010 nearly 90 percent of married couples with two or more children and an adjusted gross income between $75,000 and $100,000 will be subject to AMT

For a more thorough discussion of the AMT process, see What is alternative minimum tax (AMT)?.

Are you are subject to AMT?

That depends on your entire tax picture. But we can provide a general guide for most taxpayers.

  • AMT disallows state income taxes, property taxes, and miscellaneous itemized deductions. So if you pay high state income taxes or property taxes, or if you have high miscellaneous itemized deductions, you're a prime candidate for AMT.
  • There are a great many other factors that affect whether you are in AMT (too many to list here), but these deductions along with your income, the type of income, and other sources of deductions together it will determine if you are in AMT.
  • If you have exercised your Incentive Stock Options, the inherent gain in those options gets added in the calculation for determining the AMT Income.

Take a look at What should I do if I am in AMT? for a discussion of actions you can take to help save tax dollars.

Finding help on the internet

You might also visit the Tax Policy Center for helpful information about all sorts of tax matters—especially the AMT. You'll be amazed at the amount and type of data available.