ALTERNATIVE MINIMUM TAX
"Millions more taxpayers will become subject to the alternative minimum tax unless Congress changes the tax laws. The number of taxpayers subject to the AMT is projected to increase more than 10-fold to 8.8 million by 2008. The primary problem is that income exemptions under the AMT are not indexed for inflation, but remain fixed ($45,000 for couples filing jointly or $33,750for singles), nor are AMT tax rates indexed either.
ALTERNATIVE MINIMUM TAX: (1999) AMT As noted in past newsletters, the Alternative Minimum Tax is affecting many more taxpayers as 1.) their income increases and 2.) the AMT offset is NOT increased by inflation. Basically, the AMT was introduced to gather income from wealthy who used a lot of deductions. But there are other catches as noted by the WSJ regarding Incentive Stock Options. Say you exercised an option for $30 and the stock is now valued at $90. Under the "traditional method", you would not pay on the gain in the shares till you subsequently sold the stock. But the AMT would include the $60 per share as income NOW under the AMT calculations.
AMT (2002) : By 2010, Alternative Minimum Tax Will Tax 36 Million Taxpayers
The alternative minimum tax, originally enacted to prevent the wealthy from escaping income taxes entirely, will grow sharply until it affects 36 million increasingly middle-class taxpayers by 2010, researchers with the nonpartisan Tax Policy Center