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Alternative Minimum Tax

The Alternative Minimum Tax or AMT is a provision of the federal tax code originally enacted to close certain tax loopholes enjoyed by the very rich.

Expanded Definition

The alternative minimum tax was originally enacted when it was discovered that certain wealthy individuals paid no income taxes on substantial income by investing exclusively in tax free bonds. The AMT was intended to close this loophole to make sure that everyone paid a share of federal income taxes.

As the cost of living has increased middle income families are finding their income begins to encroach on the AMT limits. So far Congress has enacted annual exemptions to the AMT for the middle class, but they have failed in efforts to enact a permanent solution. AMT continues to be an annual tax issue in Congress.

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