Alternative Minimum Tax - AMT

The Alternative Minimum Tax (AMT) is a part of the the U.S. tax code designed to prevent high-income individuals with lots of deductions from paying virtually no tax. The AMT works by adding certain deductions back into a taxpayer’s tax liability in order to insure that a minimum level of tax is paid regardless of the amount of deductions for which the taxpayer is eligible.

There are two separate AMTs, one for corporations and the other for individuals. The individual AMT was established in 1969 and at the time targeted a handful of households nation-wide. In recent years, more upper-middle-class taxpayers have become liable for the AMT, leading to a fair amount of controversy. In these recent years, Congress has passed bills each year designed to reduce the impact of the tax.