Alternative Minimum Tax


AMT. An IRS system created to ensure that high-income individuals, corporations, trusts, and estates pay at least some minimum amount of tax, regardless of deductions, credits or exemptions. It functions by adding certain tax-preference items back into adjusted gross income. While it was once only important for a limited number of high-income individuals who made extensive use of tax shelters and deductions, more and more people are being affected by it. The AMT was introduced in 1969, and was originally intended only to affect 155 U.S. households, but by 2010 it is projected that up to 20% of households may be affected by AMT. The AMT is often triggered when there are large numbers of personal exemptions on state and local taxes paid, large numbers of miscellaneous itemized deductions or medical expenses, or by Incentive Stock Option (ISO) plans. The AMT has become one of the most controversial tax mechanisms in existence.

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You should try and find a way to use the alternative minimum tax in your favor if that is at all possible.

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You need to understand how the alternative minimum tax works and find out a way to minimize the damages from it.

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My dad makes a lot of money from his thriving dental practice, but he has to hire a couple of accountants to do his taxes every year because as a high-income earner he is subject to the Alternative Minimum Tax to make sure he pays his fair share.

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alternative investments tax preference item