The Alternative Minimum Tax

The Tax Policy Center has dubbed the Alternative Minimum Tax "the epitome of pointless complexity."

That's because the AMT is a parallel income tax system.

Figuring out whether you're subject to the AMT means calculating your tax liability twice -- once under the rules of the regular income tax code, and once under the AMT rules. You must pay whichever is higher.

The AMT was created in 1969 over outrage that 155 high-income households making over $200,000 at that time didn't end up owing any federal income tax. That $200,000 would be worth $1.3 million today.

The problem is that the so-called "wealth tax" today can end up hitting all sorts of people in the middle class and upper middle class. Here's why:

For starters, the income that is exempt from tax under the AMT is still very low. For 2015, it's just $53,600 if you're single and $83,400 if married filing jointly.

Second, the AMT disallows many deductions and other tax breaks that many who make less than $200,000 are allowed to take under the regular income tax.

Non-wealthy households most vulnerable to the AMT typically:

Live in a high-tax state and city: You're not allowed to deduct state and local income taxes or property taxes under the AMT even though you may do so under the regular code. That means those in New York and California among others are particularly vulnerable.

Have a big family: Every child you have is a personal exemption on your 1040. And personal exemptions are disallowed under the AMT.

These two reasons go a long way in explaining why tax experts think the AMT is poorly targeted.

Many think it would make sense for lawmakers to either repeal the AMT altogether or to at least narrow its reach to just very high-income filers. But that means they'd need to find another source of revenue to compensate for the loss of roughly $385 billion that the AMT is expected to raise over the next decade.

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