Explore commonly used personal finance terms.
The Alternative Minimum Tax is a parallel tax system requiring high-income individuals to calculate taxes twice: once under the standard tax rules and once under the AMT rules, paying whichever is higher. The AMT prevents high earners from using deductions and credits to reduce tax liability excessively. AMT adjustments may disallow certain tax breaks, leading to a higher tax liability. Taxpayers must understand AMT requirements to anticipate potential tax obligations and ensure compliance with IRS regulations.
