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A few states also collect AMTs, the federal tax that caught Trump

October 2, 2020
Donald Trump signing tax form February 2016 via Twitter

Donald J. Trump posted this photo in 2016 on Twitter, saying it represented the size of his tax return filing.

When we got a glimpse of Donald J. Trump's federal 2005 tax year filing back in 2017, one thing was very clear. Trump's personal tax situation is why during his initial presidential campaign he called for the elimination of the federal Alternative Minimum Tax (AMT).

The New York Times' recent exposé of more than two decades of Trump tax information, underscores his adversarial relationship with this parallel tax system.

In the few years that Trump did pay federal income tax, The Times' story noted that it was due primarily to the AMT. Specifically:

"Mr. Trump paid alternative minimum tax in seven years between 2000 and 2017 – a total of $24.3 million, excluding refunds he received after filing. For 2015, he paid $641,931, his first payment of any federal income tax since 2010."

About the AMT: This alternative tax was created in 1969 after it was revealed that a few rich taxpayers — and we're talking a really few, specifically only 155 people who back then made more than $200,000 — avoided paying any tax.

The AMT was designed to ensure that those (and future) wealthy taxpayers paid at least some tax at either 26 percent or 28 percent. Basically, you compute your regular tax amount on your Form 1040, then do it all again to determine if you must pay the AMT.

This double computation basically includes adding back some itemized deductions that reduced your ordinary tax liability.

The extra tax filing work, along with the fact that the AMT didn't originally factor in inflation each year, soon made it one of the most hated taxes among the middle class.

Yep, the middle-class, not just the rich. These not-necessarily wealthy taxpayers were, due to the inflation oversight, getting increasingly caught up in the AMT net.

Congress eventually took care of the inflation issue, mandating in 2013 that the regular income levels that could trigger the AMT now get a bit of a bump each year if living costs so demand. The Internal Revenue Service's inflation-adjusted earnings levels in 2020 that you must hit before you start to worry about the AMT are:

  • $72,900 for single and head of household taxpayers,
  • $113,400 for married couples filing joint returns or surviving spouses, and
  • $56,700 for married couples filing separately.

The Tax Cuts and Jobs Act of 2017 eased the AMT threat on middle- and upper-middle-income earners even more. The Republican tax reform law established a larger income exemption amount and increased the threshold at which that exemption phases out.

But Uncle Sam's AMT is still around.

And so are some state minimum tax laws.

Five states also have individual & corporate AMTs: The Tax Foundation, a Washington, D.C.-based nonprofit tax policy think tank, created the map below showing the few states that have a state individual AMT.

State-Individual-Alternative-Minimum-Tax-AMT-2020_Tax-Foundation

In case you're reading this on a smaller mobile device and can't quite make out the state boundaries, they are California, Colorado, Connecticut, Iowa and Minnesota.

Five states also have corporate AMTs. California, Iowa and Minnesota apply minimum taxes to business taxpayers as well as individuals. Kentucky and New Hampshire collect minimum tax amounts only from business filers.

Like Trump and state and federal taxpayers across the country, the Tax Foundation, which advocates lower, more broadly based taxes, is not a fan of minimum tax laws.

"The original goal of AMTs — to prevent deductions from eliminating income tax liability altogether — can be accomplished best by simplifying the existing tax structure, not by instating an alternative tax which adds complexity and lacks transparency and neutrality," writes Janelle Cammenga, Tax Foundation policy analyst, in the organization's blog post accompanying the map.

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TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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