The tax overhaul changes the AMT so that it applies to far fewer people.
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February 13, 2018 11:55 a.m. ET
Lawmakers working on the new tax law nearly repealed the alternative minimum tax, a parallel tax system that is both complex and unpredictable. But they finally kept it, with some modifications.
The purpose of the AMT is to limit the tax breaks afforded by the regular tax system to ensure that those who get many benefits pay some tax.
Many effects of the new AMT are still unclear. The good news for most current AMT payers is that it will affect far fewer people, said economist Joe Rosenberg of the Tax Policy Center.
The AMT in effect through the end of 2017 affected filers of about five million returns, many earning between $200,000 and $600,000. Rosenberg expects the revised AMT to affect filers of around 200,000 returns, many of which earn more than $600,000.
Several triggers from the previous AMT, such as state and local tax deductions, personal exemptions, and miscellaneous deductions, have been reduced or repealed. In addition, the AMT exemption has been extended.
According to Rosenberg, the tax breaks that trigger the revised AMT are likely to be more unusual items such as incentive stock options, interest from certain municipal bonds and net operating losses.
—Laura Saunders
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