Alternative Minimum Tax
About Alternative Minimum Tax:
Alternative Minimum Tax is a special tax designed primarily to ensure that corporate and wealthy individuals (high-income noncorporate taxpayers) pay at least some tax, regardless of their deductions, tax benefits or the use of legal tax breaks. It prevent some taxpayers from a regular tax bill that is reduced in excess due to deductions and other tax considerations. The Alternative minimum tax ignores certain deductions or tax benefits allowed by the regular rules and a two-tier 26% or 28% special rate applies to a larger or broadly based income of an individual taxpayer, a larger amount of income than is hit by regular tax rates. In the case of business, a 20% special rate to broadly based income of a corporation. If the alternative minimum tax exceeds the regular income tax, then the former (the AMT) is to be paid by the taxpayer instead of the regular income tax bill (ie. the person pays either one or another, whichever is higher. The rate is applied to alternative minimum taxable income, which is taxable income increased by tax preferences and adjusted by adding back all or a portion of certain items that were deducted in computing regular taxable income. Former IRC (check if this IRC provision is current here) §55.
The Alternative Minimum Tax had, from the 1990s, more effect on people who live in high-tax states, have many children or exercise incentive stock options, however the net income at their disposal. Main Contributor: Mike Harries.
See Alternative Minimum Tax also in the following sources:Alternative Minimum Tax in the American Legal Encyclopedia and Alternative Minimum Tax in the Worldwide Legal Encyclopedia.
See State Income Tax in the American Encyclopedia of Law.
See Corporate Tax in the U.S. Legal Encyclopedia and Corporate Tax in the International Legal Encyclopedia.
Description and Definition of Alternative Minimum Tax (AMT)
Alternative Minimum Tax (AMT) is a special tax designed primarily to prevent high-income taxpayers from using so many tax breaks that their regular tax bill is reduced to little or nothing. The tax is triggered if certain tax benefits reduce your regular income tax below the Alternative Minimum Tax computed on Form 6251. AMT applies tax rates of 26% and 28%.
Leave a Reply