Everyone knows the history of the Alternative Minimum Tax – its intended purpose was to ensure that the wealthy were paying at least something like what today is called their “fair share” of taxes. But as everyone also knows, its real impact has landed on the masses who are far from finding themselves in this wealthy category. How the AMT has failed in its purpose is easily seen by looking at the income tax return of someone who really can be considered “rich.”Presidential campaign seasonOnce again (how does it come around so often?) we find ourselves in the throes of a Presidential campaign. Along with the many unpleasantries being exchanged by candidates is the challenge to release personal income tax returns. After much prodding, one candidate recently, but reluctantly, released his Form 1040, and this tax return shows that he in fact definitely is in the wealthy, even “super wealthy,” category.Do the wealthy pay the AMT?The positive news is that the answer to this question is “yes.” However, the not-so-good news is seeing the actual amount of Alternative Minimum Tax that this individual in fact is paying. In the two tax years that this presidential candidate has paid the AMT, the additional tax burden that resulted was barely over one percent of his income. Specifically, without the AMT his total Federal tax rate was 13.3% in 2010, and 14.3% in 2011. The AMT added 1.1% each year, for a whopping tax rate of 14.4% and 15.4%, respectively. And this is on over $20 million of income in each of the two years!What are the Alternative Minimum Tax triggers at this level of income?The items that are high on the list of every single AMT payer are the same ones that also hit the wealthy. These are both on the income side as well as on the deduction side, and they principally revolve around capital gains and itemized deductions, and for the itemized deductions in particular the deductions for state income taxes as well as for property taxes.Capital gainsWithout even looking at this individual’s tax return, as one quickly can conclude from the tax rates shown above, most of this individual’s income comes from long-term capital gains which are eligible to be taxed at the low 15% rate instead of ordinary income rates of 35%. These large capital gains cause two Alternative Minimum Tax problems – the obvious one is the loss of the AMT exemption because of the high level of taxable income. But the other is the effect of having to pay state income taxes on these capital gains as well as high property tax payments.State income taxesMost, if not all, states tax capital gains at the same rate as ordinary income. Thus, a large capital gain will carry with it the same state income tax burden as would the same amount of ordinary income. The larger an individual’s state income tax of course the greater his chances of being caught in the Alternative Minimum Tax. This same basic problem exists for the wealthy as it does for every other AMT payer.Property taxesAlong with wealth comes the need to own homes – usually large ones and usually more than one. Accompanying this ownership privilege is the requirement to pay significant amounts of property taxes – surprisingly the wealthy get no break on their property taxes. Just like state income taxes, property taxes are one of the most common items for individuals who are stuck in the Alternative Minimum Tax.What could this individual do to reduce his Alternative Minimum Tax?There are no secrets here – the same actions that every AMT payer can take would help a wealthy individual reduce his Alternative Minimum Tax. For example, one is watching the timing of payment of state income taxes and property taxes at year-end. If a taxpayer is in the AMT one year but not the next, whether the individual is wealthy or not wealthy, trying to get the state tax deductions paid in the year he is not in the Alternative Minimum Tax will make a big difference. Also, if an individual has multiple homes, the opportunity to change his domicile to a state that doesn’t have income taxes – like Florida, for example – would save significant state income taxes and correspondingly reduce the individual’s AMT burden. The same Alternative Minimum Tax planning concepts apply to everybody!