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Alternative Minimum Tax (AMT)Alternative Minimum Tax (AMT)
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Alternative Minimum Tax (AMT)

Definition

A separate way to calculate your taxes to ensure high-income earners pay a minimum amount, which may apply if you have many deductions.

What to consider

  • Understand which deductions might trigger the AMT.
  • Consider how the AMT could increase your overall tax bill.
  • Stay informed about changes in tax laws that might impact your calculations.

Real world scenarios

  • When Jacob filed his tax return, he discovered that his numerous deductions triggered the Alternative Minimum Tax, so he had to pay an extra amount despite his low taxable income.

Related terms

W-2
Income Tax
Capital Gains Tax
Itemized Deduction
Earned Income Tax Credit (EITC)

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