The alternative minimum tax may be one of the more complicated rules in the tax code, but it’s important to know.
Its origins date back to 1969, when it was created “because Congress was embarrassed because somebody did a study that discovered that about 24 millionaires didn’t pay any taxes, so they created the AMT,” explains Kiplinger’s Personal Finance tax expert Kevin McCormally.
He says the AMT basically ensured that all people who make a certain amount of money pay at least some taxes. The problem is that for years that income threshold was so arbitrary, more of the middle class was included.
Read More: Skip the Stamps, File Taxes Electronically
“Finally last year, in the bill they passed, they set a high exemption amount for the AMT — it affects about ten million people,” says McCormally. “If it affected you last year, it will probably affect you this year. If it didn’t, you’re probably safe.”
The AMT threshold is now indexed for inflation, so it should be pretty consistent year-to-year over who will be affected.
How can you avoid it? Here’s some tips from Kiplingers.