PRESENT LAW AND BACKGROUND RELATING TO 

THE INDIVIDUAL ALTERNATIVE MINIMUM TAX 

Scheduled for a Public Hearing 

before the 

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

of the 

HOUSE COMMITTEE ON WAYS AND MEANS 

on March 7, 2007 

Prepared by the Staff 

of the 

JOINT COMMITTEE ON TAXATION 

March 5, 2007 

JCX-10-07 
i 

CONTENTS 

Page

INTRODUCTION .......................................................................................................................... 1 

I. INDIVIDUAL ALTERNATIVE MINIMUM TAX.................................................................... 2 

A. Present Law and Legislative Background........................................................................... 2 

II. DATA AND DISCUSSION OF ISSUES................................................................................. 7 

A. Data..................................................................................................................................... 7 

B. Discussion of Issues.......................................................................................................... 19 
1 

INTRODUCTION 

The Subcommittee on Select Revenue Measures of the House Committee on Ways and 

Means has scheduled a public hearing for March 7, 2007, on the individual alternative minimum 

tax. This document,1

 prepared by the staff of the Joint Committee on Taxation, provides a 

description of the present law and background relating to the individual alternative minimum tax. 

 1

 This document may be cited as follows: Joint Committee on Taxation, Present Law and 

Background Relating to the Individual Alternative Minimum Tax (JCX-10-07), March 5, 2007. 
2 

I. INDIVIDUAL ALTERNATIVE MINIMUM TAX 

A. Present Law and Legislative Background 

In general

An alternative minimum tax (“AMT”) is imposed on an individual, estate, or trust in an 

amount by which the tentative minimum tax exceeds the regular income tax for the taxable year.2

 

The tentative minimum tax is the sum of (1) 26 percent of so much of the taxable excess as does 

not exceed $175,000 ($87,500 in the case of a married individual filing a separate return) and (2) 

28 percent of the remaining taxable excess. The taxable excess is so much of the alternative 

minimum taxable income (“AMTI”) as exceeds the exemption amount. The maximum tax rates 

on net capital gain and dividends used in computing the regular tax are used in computing the 

tentative minimum tax. 

The exemption amounts are: (1) $62,550 for taxable years beginning in 2006 and $45,000 

for taxable years beginning thereafter in the case of married individuals filing a joint return and 

surviving spouses; (2) $42,500 for taxable years beginning in 2006 and $33,750 for taxable years 

beginning thereafter in the case of other unmarried individuals; (3) $31,275 for taxable years 

beginning in 2006 and $22,500 in taxable years beginning thereafter in the case of married 

individuals filing separate returns; and (4) $22,500 in the case of an estate or trust. The 

exemption amounts are phased out by an amount equal to 25 percent of the amount by which the 

individual’s AMTI exceeds (1) $150,000 in the case of married individuals filing a joint return 

and surviving spouses, (2) $112,500 in the case of other unmarried individuals, and (3) $75,000 

in the case of married individuals filing separate returns or an estate or a trust. These amounts 

are not indexed for inflation. 

Alternative minimum taxable income is the individual’s regular taxable income increased 

by certain adjustments and preference items. In the case of items that involve the timing of 

deductions, the AMTI treatment negates the deferral of income resulting from the regular tax 

treatment of these items. 

Adjustments and preferences

The adjustments and preferences3

 that individuals must take into account to compute 

AMTI are: 

1. Depreciation on property placed in service after 1986 and before January 1, 1999, is 

computed by using the generally longer class lives prescribed by the alternative 

depreciation system of section 168(g) and either (a) the straight-line method in the 

case of property subject to the straight-line method under the regular tax or (b) the 

 2

 There is also a corporate alternative minimum tax, which is not the subject of this document. 

3

 “Adjustments” is the term used for those items listed in section 56 of the Code and 

“preferences” is the term used for those listed in section 57 of the Code. 
3 

150-percent declining balance method in the case of other property. Depreciation on 

property placed in service after December 31, 1998, is computed by using the regular 

tax recovery periods and the AMT methods described in the previous sentence. 

Depreciation on property acquired after September 10, 2001, and before January 1, 

2005 (January 1, 2006, for certain property), which is allowed an additional allowance 

under section 168(k) for the regular tax, is computed without regard to any AMT 

adjustments. 

2. Mining exploration and development costs are capitalized and amortized over a 10-

year period. 

3. Taxable income from a long-term contract (other than a home construction contract) is 

computed using the percentage of completion method of accounting. 

4. The amortization deduction allowed for pollution control facilities placed in service 

before January 1, 1999 (generally determined using 60-month amortization for a 

portion of the cost of the facility under the regular tax), is calculated under the 

alternative depreciation system (generally, using longer class lives and the straight-line 

method). The amortization deduction allowed for pollution control facilities placed in 

service after December 31, 1998, is calculated using the regular tax recovery periods 

and the straight-line method. 

5. Miscellaneous itemized deductions are not allowed. 

6. Deductions for State, local, and foreign real property taxes; State and local personal 

property taxes; State, local, and foreign income, war profits, and excess profits taxes; 

and State and local sales taxes are not allowed. 

7. Medical expenses are allowed only to the extent they exceed ten percent of the 

taxpayer’s adjusted gross income. 

8. The standard deduction and personal exemptions are not allowed. 

9. The amount allowable as a deduction for circulation expenditures are capitalized and 

amortized over a three-year period. 

10. The amount allowable as a deduction for research and experimentation expenditures 

from passive activities are capitalized and amortized over a 10-year period. 

11. The regular tax rules relating to incentive stock options do not apply. 

12. The excess of the deduction for percentage depletion over the adjusted basis of each 

mineral property (other than oil and gas properties) at the end of the taxable year is 

not allowed. 

13. The amount by which excess intangible drilling costs (i.e., expenses in excess of the 

amount that would have been allowable if amortized over a 10-year period) exceed 

65 percent of the net income from oil, gas, and geothermal properties is not allowed. 
4 

This preference applies to independent producers only to the extent it reduces the 

producer’s AMTI (determined without regard to this preference and the net operating 

loss deduction) by more than 40 percent) 

14. Tax-exempt interest income on private activity bonds (other than qualified 501(c)(3) 

bonds) issued after August 7, 1986, is included in AMTI. 

15. Accelerated depreciation or amortization on certain property placed in service before 

January 1, 1987, is not allowed. 

16. Seven percent of the amount excluded from income under section 1202 (relating to 

gains on the sale of certain small business stock) is included in AMTI. 

17. Losses from any tax shelter farm activity or passive activities are not taken into 

account in computing AMTI. 

Other rules

Net operating loss deduction

The taxpayer’s net operating loss deduction cannot reduce the taxpayer’s AMTI by more 

than 90 percent of the AMTI (determined without the net operating loss deduction). 

Nonrefundable tax credits

Except as otherwise described below, nonrefundable tax credits may not exceed the 

excess of the individual’s regular tax liability over the tentative minimum tax, meaning they are 

not allowed against the alternative minimum tax. Thus, credits such as the general business 

credit,4 the alternative motor vehicle credit, and the alternative fuel vehicle refueling credit 

generally are not allowed against the AMT. 

Several exceptions apply to the general rule denying credits against the AMT. 

The alternative minimum tax foreign tax credit reduces the tentative minimum tax. 

For taxable years beginning before 2007, the nonrefundable personal credits (i.e., the 

dependent care credit, the credit for the elderly and disabled, the adoption credit, the child tax 

credit,5

 the credit for interest on certain home mortgages, the HOPE Scholarship and Lifetime 

Learning credits, the saver’s credit, the D.C. homebuyer’s credit, the nonbusiness energy credit, 

and the residential energy efficient property credit) are allowed to the extent of the entire amount 

of the individual’s regular tax and alternative minimum tax. 

 4

 Exceptions apply to certain employment and energy credits. 

5

 A portion of the child credit may be refundable. 
5 

For taxable years beginning after 2006, the nonrefundable personal credits (other than the 

adoption credit, child credit and saver’s credit) are allowed only to the extent that the 

individual’s regular income tax liability exceeds the individual’s tentative minimum tax 

(determined without regard to the minimum tax foreign tax credit). The adoption credit, child 

credit, and saver’s credit are allowed to the full extent of the individual’s regular tax (reduced by 

the other nonrefundable personal credits) and alternative minimum tax.6

If an individual is subject to AMT in any year, the amount of tax exceeding the 

taxpayer’s regular tax liability is allowed as a credit (the “AMT credit”) in any subsequent 

taxable year to the extent the taxpayer’s regular tax liability exceeds his or her tentative 

minimum tax liability in such subsequent year. For individuals, the AMT credit is allowed only 

to the extent that the taxpayer’s AMT liability is the result of adjustments that are timing in 

nature. The individual AMT adjustments relating to itemized deductions and personal 

exemptions are not timing in nature, and no minimum tax credit is allowed with respect to these 

items. For taxable years beginning before 2013, individuals with minimum tax credits more 

than three years old are allowed a portion of these credits each year as a refundable credit. 

Legislative Background

The Tax Equity and Fiscal Responsibility Act of 1982 enacted the first comprehensive 

individual AMT.7 According to the legislative history of that Act, “the committee has amended 

the present minimum tax provisions applying to individuals with one overriding objective: no 

taxpayer with substantial economic income should be able to avoid all tax liability by using 

exclusions, deductions, and credits.”8 The AMT provisions enacted in 1982 are the foundation 

for the present law individual AMT. Under the 1982 Act, in computing AMTI, the deduction for 

State and local taxes, the deduction for personal exemptions, the standard deduction, and the 

deduction for interest on home equity loans were not allowed. Incentive stock option gain was 

included in AMTI. These remain the principal preferences and adjustments under present law. 

A rate of 20 percent applied to AMTI in excess of an exemption amount of $40,000 ($30,000 for 

unmarried taxpayers). The exemption amounts were not indexed for inflation, even though the 

regular rates were scheduled to be indexed for inflation in future years. Nonrefundable credits 

(other than the foreign tax credit) were not allowed against the AMT. 

The Tax Reform Act of 1986 largely retained the structure of the prior-law AMT, except 

that deferral preferences were properly adjusted over time and a minimum tax credit was added. 

 6

 The rule applicable to the adoption credit and child credit is subject to the sunset provision of 

the Economic Growth and Tax Relief Reconciliation Act of 2001. 

7

 An add-on minimum tax was first enacted by the Tax Reform Act of 1969. The add-on 

minimum tax was repealed by the 1982 Act. The add-on minimum tax, as originally enacted, generally 

was a tax at a 10-percent rate on the sum of the specified tax preferences in excess of the sum of $30,000 

plus the taxpayer’s regular tax. 

8

 Tax Equity and Fiscal Responsibility Act of 1982, S. Rpt. No. 97-494 Vol. 1, at 108 (July 12, 

1982). 
6 

Preferences were added for interest on private activity bonds and for appreciation on charitable 

contributions (later repealed). The tax rate was increased from 20 to 21 percent, and the 

exemption amount was phased-out for individuals with AMTI in excess of $150,000 (112,500 

for unmarried taxpayers). The prior-law preferences were retained. Net operating losses were 

allowed to offset only 90 percent of AMTI and the foreign tax credit was not allowed to reduce 

the tentative minimum tax by more than 90 percent. 

Since 1986, several changes have been made to the computation of the individual AMT. 

The principal changes are set forth below: 

Adjustments and preferences.–The principal changes made in the determination of AMTI 

were to repeal the preference for charitable contributions of appreciated property; repeal the 

preference for percentage depletion on oil and gas wells; substantially reduce the amount of the 

preference for intangible drilling expenses; and repeal the requirement that alternative 

depreciation lives be used in computing the deduction for ACRS depreciation. 

Rates.–The Omnibus Budget Reconciliation Act of 1990 increased the individual AMT 

tax rate from 21 percent to 24 percent (when the maximum regular tax rate was increased from 

28 percent to 31 percent) and the rate was further increased by the Omnibus Budget 

Reconciliation Act of 1993 to the 26- and 28-percent rate structure of present law (when the 

maximum regular tax rate was increased from 31 percent to 39.6 percent). 

The Revenue Reconciliation Act of 1997 conformed the AMT capital gain rates to the 

lower capital gain rates adopted for the regular tax. The Jobs and Growth Tax Relief 

Reconciliation Act of 2003 conformed the AMT rates for dividends to the lower rates adopted 

for the regular tax. 

Exemption amounts.–The Omnibus Budget Reconciliation Act of 1993 increased the 

AMT exemption amounts to $45,000 ($33,750 for unmarried taxpayers). The AMT exemption 

amounts were temporarily increased to $49,000 ($35,750 for unmarried individuals) for 2001 

and 2002, further increased to $58,000 ($40,250 for unmarried individuals) for 2003, 2004, and 

2005, and further increased to $62,550 ($42,500 for unmarried individuals) for 2006. 

Credits.–For 1998 and subsequent years, the nonrefundable personal credits have been 

allowed on a temporary basis to offset the AMT. The last extension, through 2006, was enacted 

by the Tax Increase Prevention and Reconciliation Act of 2005. The Economic Growth and Tax 

Relief Reconciliation Act of 2001 (“EGTRRA”) provided that the child tax credit, the adoption 

credit, and the saver’s credit may offset the AMT (subject to the sunset provisions of that Act). 

The American Jobs Creation Act of 2004 provided that the foreign tax credit may offset the 

entire tentative minimum tax. The Tax Relief and Health Care Act of 2006 allowed the 

minimum tax credit for individuals to be refundable in part. 
7 

II. DATA AND DISCUSSION OF ISSUES 

A. Data 

Data on taxpayers affected by the AMT

A taxpayer has an alternative minimum tax liability only when his tentative minimum tax 

exceeds his regular tax liability. However, under present law, for taxable years after 2006, 

nonrefundable personal credits (with certain exceptions as described above) may not reduce 

regular tax liability below the tentative minimum tax. Thus, a taxpayer may be affected by the 

AMT without technically having an AMT liability if the taxpayer’s regular tax exceeds the 

tentative minimum tax by an amount that is less than the credits. In this case, the taxpayer may 

reduce his or her regular tax liability to the tentative minimum tax amount, but cannot use the 

full amount of credits because the credits cannot be used to reduce tax liability below that of the 

tentative minimum tax. Because the number of taxpayers affected by the AMT through lost 

credits or with actual AMT liability is determined by an interaction with the regular tax system, 

in general reductions in regular tax liability, whether from decreases in regular tax rates or from 

expansions of credits and deductions, will increase the number of taxpayers impacted by the 

AMT. Similarly, increases in regular tax liability will decrease the number of taxpayers impacted 

by the AMT. 

Figure 1, below, shows the number of taxpayers with AMT liability and the aggregate 

amount of such liabilities from 1987 through 2004,9

 together with projections for 2006 through 

2017. Figure 2 presents projected data on individual taxpayers affected by the individual AMT 

for 2006 through 2017.10 These data show that there will be a sharp increase in the number of 

taxpayers affected by the AMT in 2007. The principal reason for this increase is that, beginning 

in 2007, the AMT exemption levels revert to the levels in effect prior to 2001 and certain 

nonrefundable personal credits are no longer allowed against the AMT. The number of 

taxpayers affected by the AMT continues to rise through 2010 as a result of the fact that the 

AMT exemption levels are not indexed for inflation while the regular income tax is indexed for 

inflation. By 2010, almost 31 million individual income tax returns will have AMT liability 

and/or restricted use of credits totaling approximately $119 billion. The number of taxpayers 

affected by the AMT declines in 2011 as a result of the expiration of the provisions of 

 9

 2005 data are not yet available, and Joint Committee on Taxation models do not make 

projections for years prior to the immediately preceding year. 

10 The figures and tables in this pamphlet define taxpayers affected by the AMT as those who 

have an AMT liability or who have restricted use of credits as a result of the AMT. There are some other 

ways in which taxpayers can be affected by the AMT that do not show up in this definition. For example, 

some taxpayers may choose to itemize deductions, even when the standard deduction would be higher, 

because certain itemized deductions are allowed on the AMT while the standard deduction is not. Such a 

taxpayer could then have a regular tax liability in excess of their AMT liability and not show up in the 

tables as a return “affected by the AMT,” even though in the absence of the AMT they would have chosen 

to take the standard deduction in order to further reduce their tax liability. 
8 

EGTRRA.11 The expiration of EGTRRA raises regular income tax liability and thus causes 

fewer taxpayers to be affected by the AMT. After a one-time decline in the number of taxpayers 

affected by the AMT in 2011, the number will resume rising because the AMT exemption 

amounts are not indexed for inflation. 

Table 1, below, shows the percentage of taxpayers affected by the AMT for years 2006 

through 2017, together with the total amount of AMT liability and lost credits as a percentage of 

total individual income tax liability.

 11 The principal provisions that expire and reduce the number of taxpayers affected by the AMT 

include the expiration of the reduced regular income tax rates, the elimination of the phaseouts of 

personal exemptions and itemized deductions, and the marriage penalty relief for the standard deduction 

and the 15-percent bracket. 
9 

Figure 1.−Individual Alternative Minimum Tax

1987 − 2017

140 114 117 132 244 287 335 369 414 478 618 853 1,018 1,304 1,120 1,911 2,349

3,096

22,184

24,156

26,684

29,356

13,611

16,300

18,957

21,587

4,088

$1,675 $1,028 $831 $830 $1,213 $1,357 $2,053 $2,212 $2,291 $2,813 $4,005 $5,015 $6,478

$9,601

$6,757 $6,854

$9,465

$13,029

$19,773

$65,784

$78,212

$89,327

$107,703

$32,779

$39,445

$46,901

$54,674

0

10,00020,00030,00040,00050,00060,000

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 

Number of AMT Taxpayers (in thousands)

Number of AMT taxpayersAMT Liability

Not available

Projections: 200

Source: SOI Historical data and JCT projections.
10 

Figure 2.−Taxpayers Affected by the AMT

Projections: 2006 − 2017

4,237

23,194

25,674

28,275

30,914

18,171

20,732

23,330

26,009

29,245

32,716

$24,949

$73,311

$88,053

$100,079

$119,463

$46,305

$54,516

$63,201

$71,977

$82,772

$94,962

0

10,00020,00030,00040,00050,00060,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 

Number of taxpayers (in thousands)

Number of taxpayers affectedAMT liability and lost credits

Source: Joint Committee on Taxation
11 

2006 2007 2008 2009 2010 2011 2012 2013 2014 2

Percentage of taxpayers affected by the AMT 2.5% 13.8% 15.1% 16.5% 17.9% 10.4% 11.8% 13.1% 14.5% 16AMT liability and lost credits as a percentage of total individual income tax liability 2.5% 6.7% 7.6% 8.1% 9.1% 2.9% 3.3% 3.6% 3.9% 4

Table 1.−Percentage of Taxpayers, Affected by the AMT

Tax Years 2006 − 2007[1]

[1] Includes filing and nonfiling units. Source: Joint Committee on Taxation.
12 

Figure 3, below, shows the projected number of taxpayers affected by the AMT under the 

assumption that the principal tax rate provisions of EGTRRA are extended beyond their 

expiration under current law. These include the extension of the lower regular income tax rates 

including the establishment of the 10 percent bracket, the elimination of the phaseouts of 

personal exemptions and itemized deductions, and the marriage penalty relief for the standard 

deduction and the 15-percent bracket. Under these assumptions, the number of taxpayers 

affected by the AMT rises to 35.3 million in 2011 rather than dropping to 8.2 million, and rises 

to 51 million in 2017 rather than 35.9 million under present law. Similarly, as shown in Figure 

4, below, aggregate AMT liabilities and lost credits rise to $136.9 billion in 2011 rather than 

dropping to $46.3 billion, and they rise to $256.9 billion in 2017 rather than rising to $108.2 

billion in 2017. 

Table 2, below, shows the projected distribution of individual taxpayers affected by the 

AMT for 2006, 2007, and 2010 for all taxpayers and by filing status. While the upper income 

groups are most heavily affected by the AMT, those with the highest incomes within this 

category are less likely to be affected by the AMT since most of their income is taxed at the 

highest rate under the regular income tax, 35 percent, which exceeds the rates imposed under the 

AMT and thus such taxpayers tend to have a regular tax liability that exceeds their AMT 

liability. Note that while, in 2010, 31.5 percent of taxpayers with incomes over $1,000,000 will 

be affected by the AMT, over 98 percent of those with incomes between $200,000 and $500,000 

will be affected. 

Table 2 demonstrates that the individual AMT will affect significantly more taxpayers in 

2007 than in 2006, and will extend its reach further down the income distribution. For example, 

in tax year 2006, only 170,000 taxpayers, or 1.6 percent of taxpayers with adjusted gross income 

between $75,000 and $100,000, are estimated to be affected by the AMT and have an AMT 

liability or lost credits totaling $290 million. However, by 2007 almost half of such taxpayers in 

this income group, nearly 5.7 million taxpayers, would be affected by the AMT and experience 

AMT liabilities or lost credits totaling $6.3 billion. As noted above, the principal reason for this 

increase is the reversion of the AMT exemption levels to the levels in effect prior to 2001. Also, 

while the initial decline in the AMT exemption levels will cause a substantial spike in the 

numbers of taxpayers affected by the AMT, more taxpayers at ever lower income levels will 

gradually be affected by the AMT with each passing year because the AMT exemption levels are 

not indexed for inflation while the regular income tax generally is indexed for inflation. 

With respect to the variation in the impact of the AMT by filing status, various 

observations may be made from Table 2 but care must be taken in drawing firm conclusions with 

respect to factors driving these observations. For example, Table 2 shows that married taxpayers 

with children are the most likely to be affected by the AMT in all years. Some of this effect is 

certainly driven by the inability to claim personal exemptions against AMTI, but some of the 

effect is also likely to be driven by the fact that married taxpayers tend to have higher incomes, 

and the AMT still principally affects upper income taxpayers. Note too that, while married 

taxpayers with children are more likely to be affected by the AMT than married taxpayers 

without children, this is not true in any year at incomes above $500,000. Because there is nothing 

inherent in the structure of the AMT that can cause this (indeed, it can only cause the opposite 

effect due to the treatment of personal exemptions) this anomalous result may stem from 

differences in the within-group distribution of income between married taxpayers with children 
13 

and those without, or perhaps it may be the case that, for whatever reason, there is a correlation 

between not having children and having other AMT preferences at these income levels. 
14 

Tax Year 2006

Adjusted Gross Income Returns

AMT + lost 

credits

Percentage of 

taxpayers 

affected by 

the AMT Returns

AMT + lost 

credits

Percentage 

of taxpayers 

affected by 

the AMT Returns

AMT + lost 

credits

Percentage 

of taxpayers 

affected by 

the AMT Returns

AMT + lost 

credits

Percentage 

of taxpayers 

affected by 

the AMT Ret

Less than $20,000 25 $294 0.0% 22 $69 0.0% 1 $138 0.0% 2 $81 0.1% $20,000 - $40,000 7 $18 0.0% 6 $9 0.0% 0 $1 0.0% 0 $3 0.0% $40,000 - $50,000 17 $27 0.2% 3 $8 0.1% 5 $16 0.2% 5 $3 0.2% $50,000 - $75,000 96 $140 0.5% 28 $45 0.5% 13 $14 0.2% 16 $30 0.3% $75,000 - $100,000 177 $290 1.6% 29 $59 1.4% 35 $70 0.9% 48 $85 1.0% $100,000 - $200,000 1,259 $3,295 10.2% 202 $602 13.3% 225 $882 4.8% 690 $1,457 11.8% $200,000 - $500,000 2,302 $13,224 74.0% 261 $1,741 67.8% 733 $4,369 63.9% 1,252 $6,769 82.6% $500,000 - $1,000,000 275 $3,782 47.3% 32 $394 44.4% 123 $1,679 52.3% 116 $1,627 44.1% $1,000,000 and above 80 $3,880 23.1% 13 $550 28.9% 41 $1,765 28.5% 24 $1,495 15.9% 

Total 4,237 $24,949 2.5% 595 $3,476 0.7% 1,175 $8,935 4.0% 2,153 $11,549 7.4% 

Tax Year 2007

Adjusted Gross Income Returns

AMT + lost 

credits

Percentage of 

taxpayers 

affected by 

the AMT Returns

AMT + lost 

credits

Percentage 

of taxpayers 

affected by 

the AMT Returns

AMT + lost 

credits

Percentage 

of taxpayers 

affected by 

the AMT Returns

AMT + lost 

credits

Percentage 

of taxpayers 

affected by 

the AMT Ret

Less than $20,000 24 $298 0.0% 20 $70 0.0% 1 $141 0.0% 2 $80 0.1% $20,000 - $40,000 169 $80 0.5% 13 $10 0.1% 33 $9 0.7% 46 $37 1.0% $40,000 - $50,000 443 $264 4.0% 32 $33 0.7% 118 $72 5.2% 73 $61 3.4% $50,000 - $75,000 2,477 $1,812 12.5% 177 $211 2.8% 296 $214 5.2% 1,019 $618 17.8% $75,000 - $100,000 5,670 $6,301 49.0% 185 $297 8.5% 1,772 $1,402 42.3% 3,230 $3,928 70.8% $100,000 - $200,000 10,794 $28,158 81.0% 601 $1,581 35.9% 3,776 $7,134 75.2% 6,051 $18,354 97.0% $200,000 - $500,000 3,236 $28,098 95.3% 324 $2,394 80.6% 1,214 $9,759 96.4% 1,635 $15,438 98.1% $500,000 - $1,000,000 303 $4,178 49.8% 32 $416 43.2% 132 $1,823 54.1% 133 $1,847 47.7% $1,000,000 and above 81 $4,122 22.3% 12 $567 26.7% 42 $1,904 27.8% 25 $1,580 15.5% 

Total 23,197 $73,311 13.8% 1,396 $5,579 1.6% 7,384 $22,459 25.1% 12,214 $41,942 41.8% 

Tax Year 2010

Adjusted Gross Income Returns

AMT + lost 

credits

Percentage of 

taxpayers 

affected by 

the AMT Returns

AMT + lost 

credits

Percentage 

of taxpayers 

affected by 

the AMT Returns

AMT + lost 

credits

Percentage 

of taxpayers 

affected by 

the AMT Returns

AMT + lost 

credits

Percentage 

of taxpayers 

affected by 

the AMT Ret

Less than $20,000 26 $341 0.0% 22 $81 0.0% 2 $152 0.0% 2 $100 0.1% $20,000 - $40,000 188 $78 0.6% 10 $11 0.1% 42 $11 0.9% 51 $29 1.2% $40,000 - $50,000 635 $428 5.5% 53 $54 1.0% 134 $78 6.6% 74 $82 3.6% $50,000 - $75,000 3,649 $3,128 17.4% 265 $331 3.4% 587 $387 10.5% 1,307 $1,036 26.2% $75,000 - $100,000 6,973 $9,929 52.9% 250 $411 8.0% 2,348 $2,183 51.4% 3,535 $6,048 78.7% $100,000 - $200,000 14,447 $43,817 85.6% 954 $2,452 41.8% 5,454 $12,021 85.4% 7,491 $27,513 98.2% $200,000 - $500,000 4,326 $46,747 98.1% 487 $3,838 90.4% 1,601 $15,866 98.5% 2,153 $26,152 99.5% $500,000 - $1,000,000 537 $8,061 70.9% 49 $724 54.4% 222 $3,410 73.5% 256 $3,793 73.4% $1,000,000 and above 138 $6,934 31.5% 20 $934 35.7% 67 $3,252 36.6% 49 $2,629 25.8% 

Total 30,920 $119,463 17.9% 2,109 $8,835 2.3% 10,456 $37,358 34.4% 14,919 $67,381 50.5% 

Source: Joint Committee on Taxation.

All Taxpayers Single Taxpayers Married Taxpayers with no Children Married Taxpayers with Children All Taxpayers Single Taxpayers Married Taxpayers with no Children Married Taxpayers with ChildrenAll Taxpayers Single Taxpayers Married Taxpayers with no Children Married Taxpayers with Children

[Retuns in Thousands, Dollars in Millions]

Table 2.−The Distribution of Taxpayers Affected by the AMT by Filing Status

Projections for Tax Years 2006, 2007, and 2010
15 

Figure 3.−Projected Number of Taxpayers Affected by the AMT Under

Present Law and with the Extension of EGTRRA Rates(1)

4,237

23,194

25,674

28,275

30,914

35,282

38,143

40,619

43,030

45,802

48

4,237

23,194

25,674

28,275

30,914

18,171

20,732

23,330

26,009

29,245

32

0

10,00020,00030,00040,00050,00060,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2

Years

Returns in thousands

Extension of EGTRRA RatesPresent law

[1] This includes the extension of regular income tax rates, the elimination of the personal exemption and itemized deduction phaseouts, and the marriag

 standard deduction and the 15-percent bracket. Source: Joint Committee on Taxation. 
16 

Figure 4.−Projected AMT Liability and Lost Credits

Under Present Law and with the Extension of EGTRRA Rates(1)

$24,949

$73,311

$88,053

$100,079

$119,463

$136,908

$155,222

$173,177

$190,976

$211,419

$233,

$24,949

$73,311

$88,053

$100,079

$119,463

$46,305

$54,516

$63,201

$71,977

$82,772

$94,9

$0

$50,000

$100,000$150,000$200,000$250,000$300,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 201

Years

Amount in $ millions

Extension of EGTRRA RatesPresent law

[1] This includes the extension of regular income tax rates, the elimination of the personal exemption and itemized deduction phaseouts, and the marriag

 standard deduction and the 15-percent bracket. Source: Joint Committee on Taxation.
17 

Table 2 also shows that when the higher exemption levels of 2006 expire and revert to the 

pre-2001 levels, the overall impact on married taxpayers with children, married taxpayers 

without children, and head of household filers is of a similar magnitude, while the impact on 

single taxpayers is substantially less. The percentage of taxpayers affected by the AMT 

increases six- to seven-fold for married taxpayers with no children (4.0 percent to 25.1 percent), 

for married taxpayers with children (7.4 percent to 41.8 percent), and for head of household filers 

(1.5 percent to 10.5 percent). The percentage of single taxpayers affected by the AMT increases 

only about two-fold, from 0.7 percent to 1.6 percent. The difference in the effect on single 

taxpayers versus married taxpayers may reflect the larger drop in the magnitude of the exemption 

for married taxpayers as compared to unmarried taxpayers. The difference in the effect on single 

taxpayers versus head of household filers would not be the result of differences in the amount of 

the drop in the AMT exemption amount because the exemption level for these two groups is the 

same, but likely is a reflection of the differences in the regular tax treatment of single versus 

head of household filers, especially over the lower income ranges that did not have positive 

AMTI until the drop in the AMT exemption levels. 

Table 3, below, shows the number of returns with selected AMT preferences and 

adjustments for 2006, 2007, 2010 and 2017. Table 4, below, shows the same selected AMT 

preferences as a percentage of all AMT preferences for the same years. The tables show that 

State and local taxes and personal exemptions are the largest preferences by a substantial margin. 

They also show that while the State and local tax deduction preference is nearly three times as 

large as the personal exemptions preference in 2006, after 2006 the personal exemptions become 

equally important and grow to become more important by 2017. The reason for the increased 

importance of personal exemptions is that the decline in the real value of the AMT exemption 

over time causes the AMT to extend further down the income distribution. At lower income 

levels the amount of State and local tax deductions tend to be less than the value of personal 

exemptions, because State and local taxes are highly correlated with income, while personal 

exemptions are not. 
18 

AMT Preferences and Adjustments Returns Dollars Returns Dollars Returns Dollars State and local tax deduction 4,025 $90,943 19,845 $237,116 26,874 $332,910 Personal exemptions 4,208 $32,563 23,167 $229,542 30,888 $333,532 Miscellaneous itemized expenses deduction 1,248 $16,484 5,206 $39,158 6,474 $51,150 Standard deduction 207 $1,756 3,344 $33,850 3,694 $39,258 Medical expense deduction 206 $723 1,589 $3,788 2,591 $6,973 Refund of taxes 2,092 -$5,104 10,290 -$13,960 13,157 -$19,637 All other preferences and adjustments 1,225 $7,736 1,740 $8,583 1,971 $6,361 Total 4,237 $145,101 23,197 $538,077 30,920 $750,547 

Table 3.−Taxpayer Affected by the AMT

Projected AMT Preferences, Selected Years

2006 2007 2010 

[Returns in Thousands, Dollars in Millions]

AMT Preferences and Adjustments 2006 2007 2010 2017State and local tax deduction 62.7% 44.1% 44.4% 39.3%Personal exemptions 22.4% 42.7% 44.4% 47.5%Miscellaneous itemized expenses deduction 11.4% 7.3% 6.8% 6.9%Standard deduction 1.2% 6.3% 5.2% 6.8%Medical expense deduction 0.5% 0.7% 0.9% 1.2%Refund of taxes -3.5% -2.6% -2.6% -2.4%All other preferences and adjustments 5.3% 1.6% 0.8% 0.7%Total 94.7% 98.4% 99.2% 99.3%

Table 4.−Taxpayers Affected by the AMT

Selected AMT Preferences and Adjustments

Percentage of Total AMT Preferences and Adjustments

Projections for Selected Years

Source: Joint Committee on Taxation.
19 

B. Discussion of Issues 

The individual AMT is in some sense a separate tax system within the individual income 

tax system that applies a more compressed rate structure to a broader base of income. However, 

the AMT should be analyzed in terms of equity, efficiency, and growth by how it interacts with 

the regular tax system in determining overall Federal income tax liabilities and how it affects 

individuals’ marginal tax rates. In terms of its affect on the simplicity of the tax system, it is 

unambiguous that a separate calculation of tax liability under alternative rules is a complication 

to the individual complying with his tax obligation and the IRS in administering it. 

Equity

In practice, the AMT has the effect of requiring more taxpayers to remit at least some 

funds to the Federal Treasury every year than would be the case if only the regular income taxes 

applied. This occurs if (1) the taxpayer’s tentative minimum tax exceeds his or her regular tax 

liability, or (2) the use of tax credits allowed under the regular tax is limited by the taxpayer’s 

tentative minimum tax. To the extent that taxpayers who outwardly appear to have the ability to 

pay taxes indeed do pay taxes, some observers conclude that the AMT increases the perceived 

fairness of the income tax system. 

Indeed, the rationale for enacting the original individual minimum tax in 1969 and 

revising it later was that some taxpayers were able to avoid paying tax on relatively large 

incomes. Minimum tax legislation targeted those deductions, exemptions, exclusions, 

accounting methods, and tax credits that were considered to have contributed to such results. 

Some of the enacted AMT preferences and adjustments relate to business or investment income 

(e.g., the depreciation adjustment and the private activity tax-free bond preference) while others 

relate to regular-tax items that are more personal in nature (e.g., the denial of personal 

exemptions and certain itemized deductions). 

The AMT raises particular equity issues with respect to preference items that are personal 

in nature. For example, some believe that it is fair that families with many dependents pay less 

tax than families with fewer dependents and support the regular-tax allowance of personal 

exemptions and child credits to further this goal. Additionally, many believe that the regular tax 

permits a deduction for State and local taxes because such payments impact ability to pay 

Federal income tax, and therefore they believe a similar deduction for AMT purposes should be 

allowed.12 The AMT, in disallowing these exemptions, deductions, and credits, may frustrate 

this view of fairness. Also, under present law, as a result of the lack of indexing the AMT 

exemption levels, the reach of the AMT will increasingly extend further down the income 

distribution and thus make the tax system less progressive (see discussion above relating to Table 

2). 

 12 Others believe that the deduction for State and local taxes should not be permitted under either 

the regular tax or the AMT, as they believe such a deduction subsidizes public expenditure at the State 

and local level. 
20 

To assess whether the AMT promotes the overall equity of the tax system, it is necessary 

to look beyond who remits tax payments to the Federal Treasury to who bears the burden of the 

AMT. Regarding the individual income tax, while economists generally believe that income 

taxes on wages are borne by taxpayers who supply labor, there is disagreement concerning the 

incidence of taxes that affect the returns earned by capital such as the taxation of interest, 

dividends, capital gains, and business income from pass-through entities. Economists generally 

believe that businesses do not bear the burden of the tax (including the individual AMT), but 

rather individuals bear the burden of the tax. There is disagreement, however, over which 

individuals bear the burden of a business income tax, whether it is customers in the form of 

higher prices, workers in the form of reduced wages, owners of all capital in the form of lower 

after-tax returns on investment, or some combination of these individuals. 

The uncertainty regarding the incidence of income taxes on the returns to capital makes it 

difficult to assess the effect the AMT has on the equity of the burden of the income tax system. 

The AMT raises average tax rates for affected taxpayers. That is, the AMT increases the amount 

of the affected taxpayer’s tax liability as a percentage of his or her income. At the individual 

level, higher-income taxpayers are more likely to be AMT taxpayers than are lower-income 

taxpayers (see Table 2, above). If the burden of the taxes were to rest with the affected 

taxpayers, the individual AMT might increase the overall progressivity of the income tax system. 

Some analysts argue that certain of the business and capital income related aspects of the 

AMT promote horizontal equity by taxing more equally taxpayers who have the same economic 

capacity but choose to engage in different patterns of tax-favored activities. Other analysts note 

that in a market economy, investment by taxpayers would be expected to equilibrate riskadjusted, after-tax returns. As a consequence, the prices of tax-favored investments would be bid 

up (or their quantity increase) and the prices of tax-disfavored investments would fall (or their 

quantity decrease). In equilibrium, the pre-tax returns of tax-favored and tax-disfavored 

investments would differ, but their after-tax returns would be the same. For example, taxexempt private activity bonds trade at interest rates lower than otherwise comparable taxable 

bonds. This is because the tax-exempt borrower does not have to offer as great an interest rate to 

the lender to provide the lender with a competitive after-tax return. If after-tax returns 

equilibrate, analysts may question whether a horizontal inequity even exists for the AMT to 

correct. 

Efficiency and growth

A tax system is efficient if it does not distort the choices that would be made in the 

absence of the tax system. No tax system can be fully efficient. Whether the AMT contributes 

to the efficiency of the United States tax system depends on the extent to which it reduces other 

inefficiencies in the tax system and the extent to which it creates new inefficiencies. As an 

income tax, the AMT reduces the return to work (labor income is taxed) and saving (investment 

income is taxed). As such, the AMT may distort decisions to supply labor and capital. The size 

of the marginal tax rate is one of the primary determinants of the size of any distortion created.13 

 13 For a more detailed discussion of marginal tax rates and possible distortions of labor supply 

and saving under an income tax see Joint Committee on Taxation, Overview of Present Law and 
21 

However, the degree of additional distortion, if any, created by the AMT depends upon the tax 

rates of the AMT compared to those of the regular income tax. In this regard, it is useful to 

distinguish the effect on labor income from the effect on investment income. 

The measurement of labor income is nearly identical under the regular income tax and the 

AMT. The two differences arise in the measurement of income from certain incentive stock 

options and the measurement of net labor income when the taxpayer incurs expenses categorized 

as miscellaneous itemized expenses. If labor income is measured identically under the regular 

income tax and the AMT, then any distortions in labor supply are altered if a taxpayer subject to 

the AMT has a different marginal tax rate under the AMT than he or she would have under the 

regular tax. The AMT has statutory marginal tax rates of 26 and 28 percent. However, those 

with alternative minimum taxable income in the phaseout range of the exemption level 

($150,000 to $400,200 for married taxpayers filing jointly and $112,500 to $282,500 for 

unmarried individuals, in 2006)14 will have an effective marginal tax rate of 32.5 and 35 percent, 

respectively.15 In general, for 2006, taxpayers affected by the AMT are likely to have statutory 

regular tax rates in the 25 to 35 percent range,16 and thus in general it may be the case that 

taxpayers affected by the AMT do not experience a marginal tax rate that is much different than 

they would have faced on the regular tax. To the extent this is true, the AMT is not likely to 

have a significant impact on labor supply distortions relative to the regular income tax. Under 

present law, however, over time many more taxpayers with regular income tax rates of 15 

percent will be affected by the AMT, causing their marginal tax rate to rise to at least 26 percent, 

thus likely exacerbating labor supply distortions. Figure 5, below, shows the regular income tax 

marginal rate bracket of those affected by the AMT for 2006, 2007, and 2010. The figure shows 

that, while in 2006 less than one percent of taxpayers with a regular marginal tax rate of 15 

percent or less were affected by the AMT, by 2010 over 18 percent of taxpayers with a marginal 

income tax rate of 15 percent or less under the regular tax will face the significantly higher 

marginal tax rates of the AMT. 

 

Economic Analysis Relating to Marginal Tax Rates and the President’s Individual Income Tax Rate 

Proposal (JCX-6-01), March 6, 2001. 

14 The length of the phaseout range is four times the size of the exemption level. Thus, under 

present law, for 2007 these ranges are smaller: $150,000 to $330,000 for married taxpayers filing jointly 

and $112,500 to $247,500 for unmarried individuals. 

15 For a taxpayer in the phaseout range, a dollar of additional AMTI causes the taxpayer to lose 

$0.25 in exemptions. Hence a dollar in additional AMTI causes the tax base of the AMT to rise by $1.25. 

Thus a taxpayer in the phaseout range with a statutory rate of 26 percent has an effective marginal rate of 

26 times 1.25, or 32.5 percent. Similarly, a taxpayer in the 28 percent statutory bracket would face an 

effective rate of 1.25 times 28, or 35 percent. 

16 Taxpayers paying under the regular tax are also often subject to various phaseouts of credits, 

deductions, and other benefits that raise effective marginal tax rates above these statutory rates. See, for 

example, Joint Committee on Taxation, Present Law and Analysis Relating to Individual Effective 

Marginal Tax Rates (JCS-3-98), February 3, 1998. 
22 

In the two cases where labor income is measured differently under the regular income tax 

and the AMT, the AMT may increase the rate of tax on such forms of labor income, thereby 

seemingly increasing distortions in labor supply. However, by discouraging taxpayers from 

structuring their compensation to receive tax-favored remuneration, efficiency may be increased. 

A caveat to this discussion is warranted. For the AMT to mitigate or exacerbate a 

distortion under the regular tax, the taxpayer must know that he or she will be subject to the 

AMT. If a taxpayer is uncertain whether the tax rates of the AMT or the regular tax will apply it 

is difficult to assess the taxpayer’s behavioral response. In general, if a taxpayer subject to the 

AMT views himself or herself as only temporarily subject to the AMT, he or she is less likely to 

view the AMT tax rates as the relevant tax rates upon which to plan labor supply decisions. 
23 

 Figure 5.--Percentage of Taxpayers Affected by the AMT

By Regular Income Tax Rate Bracket

0.1% 0.1% 0.6%

3.7%

27.3%

75.3%

0.2% 0.4%

11.9%

46.7%

72.0%

96.2%

0.2% 0.5%

17.8%

52.4%

77.0%

98.3%

0%

10%20%30%40%50%60%70%80%90%

100%

0% 10% 15% 25% 28% 33% 

Regular Income Tax Rate Bracket

Percentage of Taxpayers Affected

2006 2007 2010

Source: Joint Committee on Taxation.
24 

The same general analysis of comparing the possible distorting effects of the difference 

in marginal tax rates under the regular income tax and the AMT applies to taxpayer’s decisions 

to save (to supply capital) in response to tax rates on investment income. There are several more 

cases where investment income is measured differently under the AMT than under the regular 

income tax than was the case with the measurement of labor income. By discouraging some 

taxpayers from undertaking what are otherwise tax-favored investments, efficiency may be 

increased to the extent that inefficient investment distortions that would otherwise have been 

caused by the tax-favored treatment under the regular tax are reversed. However, the AMT 

generally does not eliminate tax-favored treatment of certain activities or investments, but rather 

limits which taxpayers may take full advantage of the tax-favored treatment provided by the 

regular income tax. In addition, limiting which taxpayers can profitably undertake tax-favored 

activities could lead to more efficient investors finding the activity unprofitable, while less 

efficient investors find the activity profitable. Moreover, some tax-favored activities may be 

permitted as part of the regular income tax as a way to reduce some other inefficiency in the 

economy. These arguments might suggest that efficiency could be better improved by changes 

in the regular income taxes. The aggregate effect of the AMT on the efficient allocation of 

capital across various investment opportunities may be modest. Since the Taxpayer Relief Act 

of 1997 conformed depreciation recovery periods for both the regular income tax and the AMT, 

the number of investment opportunities on which the income might subject a taxpayer to the 

AMT rather than the regular tax has been modest in comparison to aggregate investment in the 

United States. Note that on Table 3, above, these adjustments for depreciation would be a 

portion of “All other preferences and adjustments,” which itself at $7.7 billion in 2006 is not 

one of the major adjustment items for the AMT. 

However, because of the increasing number of taxpayers subject to the AMT, there is 

another avenue by which the AMT may affect the level of investment in the United States and 

thereby affect economic growth. By increasing average tax rates (the total tax paid by certain 

taxpayers), the AMT may reduce the cash flow of potential investors. If, as some analysts 

believe, investors’ cash flows are important to investment decisions, the AMT may reduce 

aggregate investment. Further, the effect of the AMT on effective marginal tax rates, and thereby 

on the cost of capital, may change the incentive to undertake marginal investment projects and 

thereby affect the level of aggregate investment. 

Some specific preferences and adjustments within the AMT seem inconsistent with other 

parts of the AMT and thus may lead to inefficiencies. For example, it is often presumed that one 

goal of the AMT is to apply tax to a better measure of economic income, relative to the regular 

tax. It is generally conceded that in measuring economic income, deductions should be allowed 

for expenses incurred in the production of income. However, the AMT disallows the deduction 

of miscellaneous itemized deductions--including un-reimbursed employee business expenses and 

investment expenses that relate to the production of income. The disallowance of such 

deductions may lead to inefficiencies as taxpayers may be discouraged from certain otherwise 

profitable investments or activities, or encouraged to rearrange their affairs to secure AMT 

deductions for such costs (e.g., by attempting to move such deductions “above-the-line”). 
25 

Simplicity and compliance

The AMT requires a calculation of a second income tax base and computation of a tax on 

that base, so the present tax system, with an AMT, is not as simple to administer or comply with 

as would be the same system without an AMT. However, some might argue that the availability 

and widespread use of tax preparation software substantially reduces the compliance costs of the 

AMT. 

As detailed above, relatively few taxpayers currently are subject to the AMT (see Tables 

1 and 2, above). However, this observation understates the extent to which the AMT imposes a 

compliance burden on taxpayers. Many taxpayers must undertake the AMT calculation to 

determine whether, in fact, they are liable or whether the utilization of certain credits is limited. 

There are no studies that specifically measure compliance costs arising from the individual 

AMT. Figure 2, above, indicates that many more individuals will become affected by the AMT 

in the future. 

Selected reform options

In order to reduce the burden of the individual AMT, the tax could be amended in a 

number of ways. The exemption amounts could be indexed or increased so as to reduce the 

number of individuals subject to the AMT; the deduction for personal exemptions and the 

standard deduction could be allowed in computing AMTI; State and local taxes could be 

permitted against AMTI; the minimum tax rates could be reduced; the phaseout of the minimum 

tax exemption could be eliminated; all nonrefundable personal credits could be allowed to offset 

the minimum tax after 2006; or the AMT could be repealed. 

Table 5, below, shows the revenue costs for 2007 through 2017 for various changes to the 

AMT. Figure 6 and 7, below, show the impact of two of such options (allowing the deduction 

for state and local taxes and allowing personal exemptions against AMTI ) on the number of 

taxpayers who would be affected by the AMT and the amount of AMT liabilities and lost credits, 

respectively. Together, Figure 6 and Figure 7 show that allowing the personal exemptions 

against AMTI removes more taxpayers from being affected by the AMT than does allowing the 

deduction for state and local taxes against AMTI, and it does so at a lower revenue cost. Table 6, 

below, shows the distribution of the number of taxpayers affected by the AMT and the amount of 

the AMT plus lost credits for the same two options above plus the option of extending the 2006 

AMT exemption levels to 2007. The table shows that, with respect to reducing the number of 

taxpayers affected by the AMT and AMT liability and lost credits, the State and local tax option 

has a relatively greater effect at the upper ends of the income distribution, while the personal 

exemption option has the relatively greater effect at the middle and lower end of the distribution. 

Figure 8 and 9, below, show the projected number of taxpayers affected by the AMT and 

the amount of AMT liability and lost credits had the AMT exemption levels been indexed for 

inflation since 1987, following the Tax Reform Act of 1986. Had the exemption levels been 

indexed for inflation since 1987, such amounts in 2006 would be $53,000 for unmarried 

individuals and $70,650 for married taxpayers filing jointly. 
26 

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 

Permit the deduction for state and local taxes for purposes of computing AMTI. -20.8 -54.9 -62.1 -70.2 -58.5 -34.8 -40.9 -47.4 -54.3 -62.2 

Permit a deduction for personal exemptions for purposes of computing AMTI. -15.9 -43.0 -50.9 -59.6 -51.0 -31.1 -37.2 -43.5 -50.5 -58.9 

Permit the deduction for miscellaneous itemized deductions for purposes of computing AMTI. -3.5 -9.0 -9.8 -10.6 -10.3 -9.4 -10.4 -11.3 -12.2 -13.2 

Permit a deduction for the standard deduction for purposes of computing AMTI. -2.8 -7.9 -9.9 -12.0 -9.9 -5.2 -6.4 -7.7 -9.1 -11.0 

Permit deductions for the state and

local taxes, miscellaneous itemized deductions, personal exemptions, and the standard deduction for purposes of computing AMTI. -27.2 -73.3 -86.4 -101.2 -84.0 -45.1 -53.3 -62.1 -71.7 -83.3 

Repeal the AMT -30.7 -82.5 -96.3 -112.2 -93.9 -51.4 -60.2 -69.4 -79.5 -91.5 

Federal Fiscal Years

[Billions of Dollars]

Table 5.−Estimated Revenue Effects of Selected AMT Reforms

Source: Joint Committee on Taxation.
27 

Adjusted Gross Income Returns

AMT + 

lost 

credits

Percentage 

of taxpayers 

affected by 

the AMT Returns

AMT + 

lost 

credits

Percentage 

of taxpayers 

affected by 

the AMT Returns

AMT + 

lost 

credits

Percentage 

of taxpayers 

affected by 

the AMT Ret

Less than $20,000 24 298 0.03% 22 266 0.03% 24 286 0.03% $20,000 - $40,000 169 80 0.53% 127 56 0.40% 12 24 0.04% $40,000 - $50,000 443 264 4.01% 283 164 2.56% 27 52 0.24% $50,000 - $75,000 2,477 1,812 12.52% 1,444 871 7.30% 239 271 1.21% $75,000 - $100,000 5,670 6,301 49.04% 2,360 2,118 20.41% 588 713 5.09% $100,000 - $200,000 10,794 28,158 80.98% 3,828 6,074 28.72% 3,463 6,844 25.98% 1$200,000 - $500,000 3,236 28,098 95.34% 2,085 7,786 61.43% 3,067 20,541 90.37% 2$500,000 - $1,000,000 303 4,178 49.75% 130 1,891 21.35% 287 3,925 47.13% $1,000,000 and above 81 4,122 22.25% 42 2,424 11.54% 79 4,063 21.70% 

Total 23,197 73,311 13.79% 10,321 21,650 6.14% 7,786 36,721 4.63% 5

Table 6.−The Distribution of Taxpayers Affected by the AMT

Under Selected Policy Proposals

Tax Year 2007

Present Law

Permit deduction for State and 

local taxes from AMTI

Permit deduction for personal 

exemptions from AMTI

Set t

to 

[Returns in Thousands, Dollars in Millions]

Source: Joint Committee on Taxation.
28 

Figure 6.−Projected Number of Taxpayers Affected by the AMT with

The Deduction for State and Local Taxes and Personal Exemptions Allowed Against A

4,237

23,194

25,674

28,275

30,914

18,171

20,732

23,330

26,009

29,245

32,7

10,311

13,047

15,319

17,560

5,921

7,039

8,455

9,988

12,213

14,66

7,786

9,087

10,721

12,885

3,715

4,399

5,025

5,792

6,691

7,83

0

5,000

10,00015,00020,00025,00030,00035,00040,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 201

Years

Returns in thousands

Present lawAllow the deduction of SL taxes from AMTIAllow the deduction of personal exemptions from AMTI

Source: Joint Committee on Taxation.
29 

Figure 7.−Projected AMT Liability and Lost Credits with

The Deduction of State and Local Taxes and Personal Exemptions Allowed Against A

$24,949

$73,311

$88,053

$100,079

$119,463

$46,305

$54,516

$63,201

$71,977

$82,772

$94,9

$21,644

$28,747

$33,591

$43,412

$13,804

$16,123

$18,336

$20,666

$23,816

$27,8

$36,717

$43,192

$48,285

$58,282

$19,182

$21,977

$24,624

$27,611

$30,957

$34,8

$0

$20,000$40,000$60,000$80,000

$100,000$120,000$140,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 201

Years

Amount in $ millions

Present lawAllow the deduction of SL taxes frAllow the deduction of personal eAMTI

Source: Joint Committee on Taxation.
30 

Figure 8.−Projected Number of Taxpayers Affected by the AMT 

AMT Exemption Amount Indexed from 1987

4,237

23,194

25,674

28,275

30,914

18,171

20,732

23,330

26,009

29,245

32,7

2,517 2,720 3,158 3,340 3,860

777 863 916 954 1,010 1,08

0

5,000

10,00015,00020,00025,00030,00035,00040,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 201

Years

Returns in thousands

Present lawExemption amount indexed from 1987

Source: Joint Committee on Taxation. 
31 

Figure 9.−Projected AMT Liability and Lost Credits

AMT Exemption Amount Indexed from 1987

$24,949

$73,311

$88,053

$100,079

$119,463

$46,305

$54,516

$63,201

$71,977

$82,772

$94,9

$19,067 $20,758

$25,801 $27,334

$34,871

$10,662 $11,650 $12,371 $13,074 $13,797 $14,5

$0

$20,000$40,000$60,000$80,000

$100,000$120,000$140,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 201

Years

Amount in $ millions

Present lawExemption amount indexed from 1987

Source: Joint Committee on Taxation.