Why does the AMT exist?

Congress created the forerunner of the alternative minimum tax in 1969, after the Treasury Department reported that 155 high earners managed to avoid all income taxes legally. The structure of the tax and the rates have been changed several times since then. Currently, the AMT features a broader base and lower rates than the regular tax system.

How do you know whether you pay it?

Under the AMT, taxpayers must calculate their taxes twice – once under the normal system and once under the AMT. Then, they must pay the higher amount.

Who pays it?

The answer flows directly from the structure of the AMT. The tax falls most heavily on the upper-middle class, generally. Because personal exemptions and the state and local tax deduction are not allowed, people with large families in high-tax states are susceptible to the AMT at lower incomes.

Does it still serve its original purpose?

No. Because of individual circumstances and tax-planning techniques that the AMT does not cover, thousands of high-income taxpayers each year manage to avoid all income taxes, according to the Internal Revenue Service.

“Today, you’re seeing the AMT applied to people who no longer are your ultra-high income,” said Jeff Levin, a tax lawyer at Holland & Knight.

Why is the AMT getting worse?

Because it’s not indexed for inflation. The regular tax brackets and many deductions rise routinely and often automatically so that they still serve the same economic purpose. But the AMT has not been adjusted permanently; that’s essentially what the annual patches have accomplished.

— Richard Rubin