If Congress fails to extend the 2017 Trump tax cuts, 7.3 million taxpayers will soon be subject to the Alternative Minimum Tax, "forcing families and small businesses to do their taxes twice in order to determine if they are liable for a higher tax burden," according to House Ways and Means Chairman Jason Smith, R-Mo.
A return of the AMT exemptions and thresholds to pre-2017 levels would mean "a leap from the roughly 200,000 currently impacted by the policy," Smith warned.
Originally created "to tamp down on the ability of very wealthy individuals to use such large tax deductions and exemptions that they could pay nearly zero in taxes," the AMT's reach "grew to impact millions of taxpayers — well beyond its original intent," Smith said. "This included many small businesses that file taxes under the individual tax brackets and found their tax burden rising and the complexity of their tax filing growing worse."
The AMT rules require taxpayers to recalculate their taxes with certain deductions added back in and pay the higher of the two tax bills. A portion of income is exempt from this "alternative" calculation; the exemption is phased out at higher income levels. For tax year 2025, the exemption amount for individuals is $88,100 and begins to phase out when alternative minimum taxable income reaches $626,350. For married couples filing jointly, the exemption amount is $137,000 and begins to phase out at $1,252,700.
To estimate the effect of letting the 2017 tax law expire, Erica York, vice president of federal tax policy at the Tax Foundation, points to a projection from the Congressional Budget Office. For 2026, the CBO projects AMT exemptions of $70,900 for unmarried filers and $110,400 for joint filers with phaseout thresholds of $157,700 for unmarried filers and $210,300 for joint filers.
