If an overhaul of the U.S. tax code fails, the alternative minimum tax, or AMT, may live to bedevil taxpayers for yet another year. The AMT, adopted in...

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If an overhaul of the U.S. tax code fails, the alternative minimum tax, or AMT, may live to bedevil taxpayers for yet another year.

The AMT, adopted in 1969, was designed to ensure millionaires don’t escape taxation. Due to inflation and congressional cowardice, it’s a levy that increasingly punishes middle-class families who lose deductions for personal exemptions, mortgage interest, miscellaneous expenses and state and local property taxes.

Unless it’s eliminated or adjusted for inflation, the AMT by 2010 probably will ensnare almost a quarter of U.S. taxpayers.

While a recent report from the president’s panel on tax reform called for AMT elimination, political pressures may bury the panel’s proposals, and the tax may survive.

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Foes in the mortgage-lending, real-estate and construction industries want to defeat provisions for paring mortgage-interest and state and local tax deductions — cutbacks designed to pay for the loss of the AMT’s huge revenues.

The perception that the panel’s plan is dead on arrival may be overcome if its sponsors can sell the most powerful points. These include:

• A top tax bracket ranging from 30 to 33 percent, down from 35 percent.

• A family credit ranging from $3,300 for married couples to $2,800 for single parents.

• Three accounts that allow families to save as much as $70,000 annually tax free.

• A tax rate of 15 percent on stock dividends, capital gains and interest income. In one proposal, there’s no tax on dividends.

• Elimination of capital-gains taxes on home sales up to $600,000 for married couples filing jointly. The current limit is $500,000.

• A 15 percent refund of mortgage interest instead of the deduction for interest on a home loan based on your marginal tax rate.

By the panel’s estimates, less than 5 percent of U.S. mortgages are greater than the proposed mortgage-interest cap of $412,000.

What happens if the AMT stays? Some 48 percent of married couples will pay it versus 3 percent for singles, says the Tax Policy Center, a Washington-based research consortium. If you have more than two children and earn between $75,000 and $100,000, you’re in a group in which 94 percent are likely to pay it.

Unless inflation indexing is introduced or the tax is dropped, more than 80 percent of those paying it will earn less than $200,000.

If the AMT remains, here are some talking points to discuss with your tax planner:

• If you exercise stock options, you could trigger the AMT. Check with your planner first.

• Time expenses carefully. Medical, and miscellaneous deductions are alternative tax items. You may want to delay these write-offs.