“Really wealthy people” pay AMT - yes. But also a lot of NOT really wealthy people. I’ve paid AMT for about five years now. Single parent. Live in California. Did own a small house in another state, but sold it (no real gain or loss) in 2014. I rent now in the Bay Area, which is essentially just pouring money into a pit. One kid. Helping support a parent, but not at a level high enough for him to be a dependent. Probably will get hit with AMT again this year anyway.
The AMT brackets are now adjusted for inflation.
I like this.
This tells me the politicians clamoring for a flat tax are full of it. Or what they really mean when politicians say they want a flat tax is they want certain income to be tax free… Like capital gains. 
Back when I was working and making decent wages and living in high cost high tax New Jersey I remember paying my very high property taxes but thinking, “Oh well, at least they are deductible”… but then I took a good look at my tax return and realized that due to the AMT a large portion of my property taxes in fact were not deductible! It really blew my mind at the time. The past few years I have managed to solve my income tax “problem”… no income, no tax! (Not exactly, but close)
We pay AMT bc they refuse to index the exemption level to inflation like other tax exemptions. It never moves, inflation does. Congress is addicted to the $ though, so the unfairness in that will never be fixed.
Another unfair issue in AMT: Head of Household exemption is the same as single. So single parents…you take the brunt of it as a much larger share of income is subject to AMT than if you would “just settle down and get married!!!”
One bright side? No matter what they propose to add to taxes, or remove from deductions, once you are in AMT, it takes a huge regular income tax change to make it larger than AMT. so at least you can ignore the chatter:)
Also, very wealthy don’t pay AMT bc their regular income tax bill is still higher bc they pay the 39.6 rate on so much income. AMT tops out at 28%. You basically pay whichever is higher, but not both…(so far, but don’t give them ideas…)
Actually, I was surprised to see how high income has to be not to pay AMT. Since you have to pay the tax at 39.6% for most of your income, I thought the regular tax would soon override AMT.
“Since you have to pay the tax at 39.6% for most of your income”
You’d have to have nearly a million dollars of non-capital gains taxable income before a married couple would be paying 39.6% on more than half of their income. Faulty assumption leads to surprise. 
People in the 25-28% brackets are most likely to be in AMT, because the tax rates are essentially the same for both regular tax and AMT, and AMT allows fewer deductions but has a higher exemption.
What is AMT rate? Isn’t 20%?
We got stuck with the AMT once a few years ago. We hadn’t planned on it and it really took us by surprise. I’m really not sure what triggered it… All I know is that I’m afraid we will end up with it again… it’s not like we have the extra money laying around.
0% up to exemption amount, 26%, 28%
(other rates may apply to long term capital gains)
https://www.irs.gov/pub/irs-pdf/f6251.pdf (see line 29-30 for exemption amount, line 31 for the other rates, back side for long term capital gain rates)
Actually, since the mid 1980’s, we and you are exactly the people it was intended to tax. With the Reagan tax cuts (Democratic Congress here, this was bipartisan) the rates were lowered and deductions reduced. Much more like a flat tax. It is not an accident you are affected, Congress meant for it to happen this way. It has hit more people some years because it wasn’t always indexed, but it is now.
And cheer up for heaven’s sake!! You are paying the minimum tax!! All those people happy because they don’t see a line item on their 1040 saying AMT are paying more than the minimum. The AMT line item just makes up the difference between the minimum you have to pay and the amount you would pay with the regular deductions. If that line item is zero, you are paying above the minimum level.
MomofJandL,
I don’t remember when we haven’t paid the AMT. We were beaten into submission a long time ago. And what’s sad, is that our country has so many debts and obligations, that at some point we’ll be looking back and thinking these were the good old days of low taxation.
Unfortunately, all kinds of deductions and special stuff have crept back into the tax laws. From a political standpoint, special interest pork is best put in as a tax credit or deduction, rather than additional spending. In the future, attempts to remove the special interest porky tax credit or deduction will be opposed as “raising taxes”, while attempts to remove the special interest additional spending will be much easier to remove as “cutting wasteful government spending”. But the consequence is that the income tax is hugely complicated, mostly in ways that serve special interests while ensuring that less revenue is collected than the nominal rates make it seem like.
And if you think the personal income tax is bad in this way, the corporate income tax is even worse.
The AMT has never really been indexed for inflation, the 2012 did raise the limits a bit, but if I remember the original AMT, in the late 60’s, it kicked in at around 200k of income, which would be several million in today’s dollars. The base they put in in the 2012 tax fairness act put the AMT right into middle income households, if it had really done its job, it would have put it to where it was in 1968 in 2012 dollars, but they didn’t do that. The AMT was designed to stop the very well off who have a lot of deductions or for example, had a lot of money from tax free sourches like munis, so they paid something. They didn’t index it for inflation originally, and then when they did, turned 200k in 1968 into 5 figure income if I read it correctly. Even if they indexed the new value for inflation, it doesn’t matter, because the base value was a joke.
Seriously, what? @BunsenBurner
I actually really would like to pay AMT.
Our income would have to be substantially higher to hit AMT for 2015.
A subset of munis are subject to the AMT.
Private activity muni bonds are subject to the AMT.
http://www.schwab.com/public/schwab/nn/articles/Municipal-Bonds-When-Tax-Free-Isn-t-So-Free
When I look at this…I don’t see federal income taxes as usury.
http://taxfoundation.org/article/summary-latest-federal-income-tax-data
There was one purpose for it in the 1960s (the very high income few who paid little in tax), and it got re-purposed in the 1980s(the affluent many with lots of deductions). On purpose. The current indexing addresses that purpose. As mentioned above, a bunch of credits and new brackets and other clutter have entered the tax code since the 1980s to muck things up again.
@musicprnt Exactly! What was once a very large healthy exemption did not rise with inflation for decades. Now bc of that, you have people of modest incomes paying.
And I’m not sure why ppl seem to love to prove each other wrong here, but since they do…yes, a couple would need well over $1m in income to be deep into 39.6% rate…or as I said…the very wealthy. No faulty assumptions.
There is a tipping point where you no longer get any exemption to AMT. and yet another when your regular tax will exceed the AMT again. I’m looking forward to the latter situation;). Hey, it could happen.
I’m still chapped that a single mom is treated the same as a 22 yo single guy for AMT. And much worse than a DINK married couple!
@Madison85 No, you would not. It can hit ppl with incomes just above the exemptions. You are lucky that is not you.
Ex:
Single Dad. $75k. 5 kids. NYS income taxes.