Now that your taxes have been filed, there are probably more than a few of you that went head to head with the Alternative Minimum Tax, or as the financial’s like to call it, the AMT.

For those still unfamiliar with the AMT, just wait. That next pay raise may throw you into a head to head stand off with Uncle Sam’s dirty little tax secret.

The alternative minimum tax is really a loop hole that was design to end all loop holes. Mathematically speaking, it’s a tax calculation that adds certain tax preference items back into adjusted gross income, or AGI. If AMT is higher than the regular tax liability for the year, the regular tax and the amount by which the AMT exceeds the regular tax are paid.

So in short, your taxes are done twice, and you get to pay the higher of the two figures.

The AMT was originally set up to prevent those who earned a great deal more than us regular Joe’s from using all kinds of deductions, deferments, and other loop holes to reduce the amount of tax they have to pay. The problem is, now that us regular Joe’s are earning more (as we hope to each year), that arbitrary figure set decades ago is now starting to apply to the middle class.

So what is to be done about the AMT? Well, it’s not as simple as just eliminating it, because the IRS does depend on that income to fill the coffers that Uncle Sam turns into a “budget”.

And by “income”, I mean tens of billions of dollars each year!

Well, it turns out the House of Representatives’ Ways and Means committee has some ideas on what to do with the AMT, but like the AMT itself, appears to draw more loop holes than it seems to close up.

The committee wants those households who earn less than $250,000 per year to be exempt from the AMT. Fine by me! Problem is, that will eliminate about $65 billion per year in federal income. To make up for it, they’d have to raise taxes on those subject to the AMT by 10-15%, leaving those 1% of us who earn the most money each year, giving half of it back to the government.

There is something wrong with this plan, as it taxes those who already pay the most in taxes, even more.

Did you get bit by the AMT this year?

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