Your Taxes: You Don't Have to Be Rich Anymore to Worry About AMT

From young dot-com employees to secretaries at Microsoft(MSFT Quote), the alternative minimum tax is showing up on the most unexpected tax returns.

This parallel tax system became effective in 1970 to ensure that everyone -- even the superrich -- pays at least some income tax. So the Internal Revenue Service requires those with large deductions to also calculate their tax bill under AMT rules, which disallow standard and personal exemptions, credits for state taxes paid or miscellaneous itemized deductions.

But because the trigger point for AMT is not indexed for inflation, that tax is showing up on more and more returns from middle-class taxpayers. There was a 29.3% increase in the number of people that had to pay AMT from 1996 to 1997, the latest years for which IRS figures are available. ...