Alternative Minimum Tax (AMT)

The Alternative Minimum Tax (AMT) is a parallel tax system designed to ensure that individuals and corporations pay at least a minimum amount of tax, regardless of deductions and credits that may lower their taxable income. It calculates tax liability using a different set of rules, which limits many tax benefits. If the AMT amount is higher than the regular tax calculated, taxpayers must pay the AMT. This means it acts as a safeguard to prevent high-income earners from paying too little tax, ensuring fairness in the tax system.