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Alternative Minimum Tax (AMT)

The Alternative Minimum Tax (AMT) is intended to affect high-income individuals who use multiple deductions to greatly reduce or eliminate their liability under the regular income tax system. Originally, it applied to less than 1% of the population. However, since indexing was not included in the formula, it has grown to affect a much higher percentage if not adjusted. Each of the last several years, Congress has done a “patch” on the AMT. For 2010, if there is no “patch” it will affect 17% of the population – well below “high-income” individuals.” With the 2009 patch it affected only 3% of the population. Therefore, a patch is needed. Advocates have pushed for a permanent fix to the system, to make the annual patches unnecessary.

Congress is, again, considering a one-year patch for 2010.