Created in 1969, the Alternative Minimum Tax, or AMT, was intended to compel wealthy tax dodges to pay their fair share of taxes. Primarily, it imposed a minimum tax on people who received the bulk of their income from dividends.
The problem with the AMT, according to planner Jeff Fishman, founder of JSF Financial Planning in Los Angeles, is that it was never adjusted for inflation and, over the years, has begun to ensnare many more people than originally intended. And when that happens, he said, taxpayers suddenly lose their ability to take many substantial deductions – such as mortgage interest deductions – that they had been counting on.
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