The Alternative Minimum Tax (AMT) is a rule that was established in the United States tax code to make sure rich people don’t take advantage of loopholes to the point where they owe no tax to the government. The minimum income required to qualify for the AMT was never adjusted for inflation, so over time, more and more people have qualified for the AMT.
Some Democrats and Republicans in the Senate have joined forces to introduce a bill to repeal the AMT.
… [T]he number of taxpayers nabbed by AMT will jump from 3.5 million in 2006 to 23 million for tax year 2007 and to 39 million by 2017, according to the Tax Policy Center. That assumes President Bush’s tax cuts implemented since 2001 expire as scheduled. If they don’t, then 53 million taxpayers – or about half of all taxpayers – will pay the AMT by 2017.
However, repealing the AMT in its entirety might have a devastating effect. It will be much more difficult for the federal government to balance the budget by 2012 without this income.
For more information on the AMT, see Alternative Minimum Tax 101. While the law may be repealed in the future, it still applies to your 2006 tax return.