What Is The Alternative Minimum Tax?

Definition:

The Alternative Minimum Tax (AMT), part of the U.S. federal tax code, was authorized by Congress in 1969. It mandates a tax rate of 26-28 percent for taxpayers in a certain tax bracket.

Originally, the tax targeted only a few high income familes. In 1970, only 19,000 people were affected by the AMT; millions are paying it today. The reason? Primarily inflation; the tax brackets for AMT are not adjusted for inflation.

According to Congressional Budget Office estimates, by 2010 nearly all married couples earning between $100,000 and $500,000 will face some AMT liability. Learn more at SmartMoney.com