About 4 percent of all taxpayers will pay the AMT in 2005. If the tax law isn’t changed, the AMT will be paid by 20 percent of taxpayers in 2006 and by 30 percent in 2010.
What’s more, affluent-but-not-rich Americans may be the most vulnerable:
In 2005, 53 percent of taxpayers with incomes in the $200,000-$500,000 range will owe the AMT, along with 39 percent of taxpayers earning $500,000-$1 million, according to projections.
In 2006, 87 percent of taxpayers with incomes in the $200,000-$500,000 range will owe the AMT, along with 52 percent of taxpayers earning from $500,000 to $1 million–and 63 percent of taxpayers with incomes between $100,000 and $200,000 will owe the AMT.
By 2010, the AMT will affect virtually all upper-middle-class taxpayers with two or more kids.
This family-unfriendly levy could be eased by legislation but there seems to be little chance of that happening. AMT reform wasn’t mentioned in this year’s federal budget so it may be that the AMT is here to stay, as a stealth flat tax.
The AMT calculation starts with regular taxable income, which is then increased by certain adjustments. Once you have your AMT income, you’ll generally owe 26 percent on this income, up to $175,000, and 28 percent on greater amounts.
