The Bill Says 28%. The Math Says 42%.
A married couple earns $1 million in 2026. They pick up an extra $100,000. A good year. The federal tax on that extra cash should be 28%. That's the AMT rate printed in the law. But the actual bill is $42,000. That's 42 cents on the dollar. Not 28.
The gap between those two numbers is where this story lives.
The Backup Tax Nobody Remembers
The Alternative Minimum Tax is a second tax calculation. The IRS runs your return two ways. You pay whichever number is bigger. For years, it bit millions of people. Then the 2017 tax law cranked the exemption sky-high. The AMT population collapsed from 5 million to about 200,000. Basically everyone forgot it existed.
Fair enough. If a trap stops firing, you stop watching for it.
The Trap Resets
The One Big Beautiful Bill didn't raise the AMT rate. Still 26%. Still 28% above a certain income line. What it did was double the phaseout speed and drop the floor.
Here's what that means in plain English. The AMT gives you an exemption. A chunk of income the backup tax ignores. That chunk starts to vanish once your AMT income hits $1,000,000. Under the old math, you lost 25 cents of exemption for every dollar above the line. Under the new math, you lose 50 cents.
The AMT exemption phaseout rate has been increased from 25% to 50%.
That sounds like a small change. It isn't.
It's not a stimulus check. It's not a tax cut.
Nor is it the $1,000 "Trump Accounts" for American newborns.
Trump calls it "American brilliance at its best"… and the CEO of Coinbase says it's opening up a "golden age for freedom" in America.
Jeff Brown was consulted by members of Congress to help shape this "gift."
The Multiplier
Walk through it slow.
You earn one dollar above $1,000,000. The IRS taxes that dollar at 28%. Fine. But that same dollar also kills 50 cents of your exemption. Income that used to be sheltered is now exposed. The IRS taxes that 50 cents too. At 28%.
So. 28 cents on the dollar you earned. Plus 14 cents on the exemption you lost. That's 42 cents total. The real rate on that dollar hits 42%. One and a half times the printed rate.
The zone runs from $1,000,000 to $1,280,400 for joint filers. Every dollar in that window gets the same treatment. You earn. You lose. They tax. They tax again.
I mean, the rate on the page says 28. The rate in your wallet says 42. Both numbers are true. That's the trick.
The SALT Shove
SALT. State and local taxes. Now add that bill to the pile.
Your state income tax deduction gets added back when the IRS calculates your AMT income. Always been the rule. The deduction you took on your regular return vanishes for AMT purposes. Your AMT income swells. It shoves you deeper into the phaseout zone.
The new $40,000 SALT cap? Doesn't help here. The AMT ignores it. The AMT adds back every dollar of state and local tax, cap or no cap.
California filer sitting near $1 million? Your state taxes push your AMT income past the threshold. You slide into the 42% band without earning a penny more of real income.
The Wrench
Now the fix. It only works if you own a business. S-corp, partnership, LLC. If you're pure W-2, this wrench doesn't fit your pipe. Sorry. That's a different article.
The fix is the Pass-Through Entity Tax election. PTET. Your business pays the state income tax at the entity level. Not you. The payment never hits your personal return. Never shows up as a deduction on Schedule A, where the IRS looks for state taxes to claw back. Never gets added back for AMT.
PTET deductions reduce AMT income as well.
Right. The IRS put out formal guidance, Notice 2020-75, saying this was fine. Not a gray area. Not aggressive. Blessed. The Senate preserved the full PTET deduction when it passed the bill. Over 30 states run active PTET programs.
The mechanic is simple. The SALT addback inflates your AMT income. The PTET election removes the SALT payment from the AMT calculation before it can inflate anything. Your AMT income drops. You stay below the phaseout floor. The 42% rate never fires.
The gold accounting trick Washington hoped you'd never notice.
In 1934, the government executed a legal maneuver that transferred billions in wealth overnight.
Most Americans had no idea it was coming.
A small group who saw it early walked away wealthy.
Everyone else paid for it.
Trump has the same legal authority today. Advisors close to the administration believe he's considering using it. If he does, the transfer happens fast — and the window to be on the right side of it is already closing.
We put together a free report on exactly what this move is, why the timing points to now, and the one step ordinary Americans can take to position themselves before it happens.
It costs nothing. Takes 30 seconds to request.
The people who moved early in 1934 didn't have a warning.
You do.
The Fine Print
The bill says 28. The math says 42. The gap between those numbers is $280,400 wide. It sits right where a lot of successful couples land. Most CPAs haven't checked for AMT since 2017. I dunno. Might be worth checking whether yours has.
The government wrote the rules. We're just reading the fine print.
