Alternative Minimum Tax. An IRS mechanism 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 operates by adding certain tax-preference items back into adjusted gross income. While it was once only important for a small 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 is 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.

Use AMT in a sentence

Though he had claimed multiple deductions to lower the amount of taxes he owed, AMT still assured he payed the minimum tax amount at the end of the year.

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You should always factor in any AMT to your deal so that you know exactly how much you need to budget.

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The AMT being in existence shows the complexity of the US tax code as some corporations such as GE pay little taxes.

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