Two RMDs in One Year Is a 42% Tax Bracket Nobody Mentioned

The One Big Beautiful Bill Act came with gifts. A $40,400 SALT deduction cap. A $6,000 senior deduction for anyone born before January 2, 1962. Big numbers. Good headlines.

Now look at the wiring behind the wall. Every deduction you claim on your regular return is fuel for the Alternative Minimum Tax. The same bill doubled the rate at which the AMT burns through your exemption.

Think of your tax bill as two pipes running side by side. Pipe One is your regular tax. Deductions shrink it. That is the whole point.

Pipe Two is the AMT. It ignores most of those deductions. It runs its own math. At the end, the IRS compares the two pipes. You pay whichever number is higher.

The gap between the pipes is where the trap lives. The more deductions you claim on Pipe One, the wider that gap gets. And the wider the gap, the more the AMT bites.

Start with SALT (state and local taxes). You claim $40,400 on your regular return. Your regular tax drops. Good.

Then you flip to Form 6251. The AMT form. Your entire SALT deduction gets added back. All of it. Zero SALT for AMT purposes. That $40,400 deduction just widened the gap between your two pipes by $40,400.

Now look one income band down. Congress gave anyone 65 and older a fresh $6,000 write-off. It phases out at $150,000 of joint income and disappears at $250,000, so at your income level you never see a dime. But look at the wiring for the retiree who does. Pull up the IRS instructions for Form 6251:

Right. They wrote a tax cut for seniors. In the same sentence, they made it AMT fuel for the middle-income retiree with heavy SALT or an ISO exercise. Different income band. Same clawback.

They built the trap before the ink dried.

The AMT has an exemption. For married couples in 2026, it is $140,200. That exemption shields a chunk of your income from the AMT calculation. But it phases out as your income rises.

The new bill doubled the phaseout rate from 25% to 50%. It also dropped the threshold from $1.25 million to $1 million for joint filers.

Old math: for every dollar above the threshold, you lost 25 cents of exemption. New math: 50 cents.

I mean, do the arithmetic. You earn a dollar in the phaseout zone. The AMT taxes that dollar at 28%. But you also lost 50 cents of exemption. That 50 cents of income is no longer shielded. The AMT taxes it at 28%. That is another 14 cents. Total cost: 42 cents on every dollar.

A married couple at $1 million of income picks up an extra $100,000 from a stock sale or a bonus. That $100,000 costs them $42,000 in extra tax. Not the 28% they expected. Forty-two percent.

And SALT-driven AMT carries no minimum tax credit. Some AMT triggers let you claw the tax back in future years. SALT does not. That cash is gone.

Not the retiree earning $200,000 a year. The retiree who sells the rental property. The one who turns 73 in 2025 and delays the first Required Minimum Distribution to April 2026. Then takes the second RMD by December. Two RMDs in one year. On a $2 million IRA, that is $150,000 of extra ordinary income dumped into a single tax year. One spike. One trip through the phaseout zone. One bill at 42 cents on the dollar.

The Tax Cuts and Jobs Act cut AMT filers from 5 million to 200,000. The new bill is building that number back up. And it is using the taxpayer's own deductions as the bricks.

Look. This is not broken pipes. The plumbing works fine. You got two new tax cuts. Each one widens the gap between your regular tax and your AMT. And Congress doubled the speed at which the exemption melts.

Sure.