The alternative minimum tax—better known by its dreaded acronym AMT—will trap more taxpayers in 2011 than at anytime in its 42 year history.
An estimated 4.3 million Americans are expected to pay the AMT for the past tax year, according to the Tax Policy Center.
That will be the highest number on record—up from 605,000 in 1997, 3.9 million in 2008, and 4.2 million in 2010.
The majority of those paying the tax —originally designed to target only the highest of incomes—will be making under $200,000.
"You could say the AMT is working 'too well' because more taxpayers who don't consider themselves rich now have to pay it each year," says Jerry Zimmerman, a professor of business administration and accounting at the University of Rochester.
As the AMT catches more people, the question for many is "why me?" for a tax that was supposed to target the 'one percenters.'
The AMT has widened because the tax—unlike other taxes—has never been indexed to inflation. So as incomes have gone up, many taxpayers have been pushed into ATM tax brackets that have remained the same.
The purpose for avoiding the inflation index was money, says William Gale, a senior fellow at the Brookings Institute and co-director of the Tax Policy Center.Page 1 of 5 | Next Page