alternative minimum tax
Recent Examples of alternative minimum tax from the Web
The alternative minimum tax also goes up for this filing.
However, taxpayers who are subject to the alternative minimum tax (AMT) might not get tax savings from larger deductions for state and local taxes.
The industry did notch a significant victory by getting the corporate alternative minimum tax killed — a move executives say will reduce bankruptcies.
Lawmakers made the corporate tax rate and the corporate alternative minimum tax the same number, effectively nullifying dozens of corporate tax credits.
Republicans and the business community were stunned when the final Senate version restored the alternative minimum tax for corporations.
Additionally, in some cases, the loss of the SALT tax deduction could lead some high-income earners to pay more in tax because the alternative minimum tax (AMT) will no longer kick in for them.
Pressed for cash, McConnell & Co. decided to keep the corporate alternative minimum tax rather than repeal it as planned.
The wealthy: Upper-income households will benefit significantly because the plan would exempt many from the estate tax on inheritances and eliminate the alternative minimum tax that some wealthy Americans pay.
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First Known Use of alternative minimum tax
Financial Definition of ALTERNATIVE MINIMUM TAX
What It Is
How It Works
Taxpayers must calculate their AMT separately from their "regular" taxes calculated on IRS Form 1040. The AMT, which is calculated using IRS Form 6251, starts with the taxpayer's taxable income (income after personal exemptions and standard or itemized deductions) and adds back various adjustments to arrive at a net alternative taxable income. The AMT rules disallow many personal exemptions and many deductions. The resulting higher taxable income is then taxed at flat rate. The taxpayer compares the tax calculated under the AMT method to the tax calculated under the "regular" method and owes the higher of the two.
The exemption amounts for figuring AMT change each year, so it's important to refer to the IRS instructions or a tax professional.
Why It Matters
The goal of the AMT is to ensure that everyone pays at least some income tax. This is why the AMT calculations effectively eliminate several types of deductions and credits, creating a tax liability for a person who would otherwise pay little or no tax.
The AMT system is complicated and controversial. Its elimination of many deductions and credits particularly affect people with large amounts of itemized deductions, people with many children or dependents, people who exercise incentive stock options, and those who pay high state and local taxes or high personal property taxes. Also, because the AMT thresholds have not been frequently adjusted for inflation, more and more middle-income taxpayers are subject to AMT.
The AMT is a good example of why taxpayers should take the time to plan for taxes and consult a tax professional. In some cases, those liable for AMT may be able to lower their total tax bills by claiming itemized deductions on Form 1040, even if their total itemized deductions are less than the standard deduction. This is because the AMT system does not allow the standard deduction, and if a taxpayer claims the standard agency bond on Form 1040, he or she cannot claim itemized deductions for the AMT, according to the IRS. This could result in a lower tax bill even though the taxpayer has claimed fewer deductions.
[InvestingAnswers Feature: The AMT Trap and How to Avoid It]
alternative minimum tax
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