Alternative Minimum Tax

The Alternative Minimum Tax (AMT) is designed to ensure that individuals and corporations pay a minimum level of tax, even if they have many deductions and credits that reduce their taxable income. It operates alongside the regular income tax system, requiring taxpayers to calculate their taxes using both methods and pay the higher amount. The AMT removes certain deductions and exemptions to create a broader taxable base, which can lead to higher taxes for those with significant income but many tax breaks. It primarily affects higher-income earners who utilize various tax benefits.