alternative minimum tax


Definition of alternative minimum tax 

: a U.S. federal income tax that was originally imposed to prevent wealthy taxpayers from using tax shelters to avoid paying taxes, that excludes many deductions and exemptions allowed in computing regular tax liability, and that must be paid instead of the regular tax liability by individuals and businesses whose alternative minimum tax liability is greater than their regular tax liability

Examples of alternative minimum tax in a Sentence

Recent Examples on the Web

Many high-income households in New Jersey previously paid the alternative minimum tax, a parallel system that denies deductions for state and local taxes. Richard Rubin, WSJ, "Some GOP Lawmakers Reckon With Their Tax Vote Record," 1 Nov. 2018 So would the shrunken alternative minimum tax and estate tax and the new deduction for businesses such as partnerships that report their earnings on their owners’ individual tax returns. Richard Rubin, WSJ, "House Republicans Move to Extend Individuals’ Tax Cuts," 13 Sep. 2018 Another hitch limited or disallowed this deduction for filers who owed alternative minimum tax. Laura Saunders, WSJ, "What to Do Now That the Deduction for Investment Fees Is Dead," 4 May 2018 Corrections & Amplifications Medical and dental deductions between 7.5% and 10% of income aren’t triggers for the alternative minimum tax in 2018. Laura Saunders, WSJ, "Who Will and Won’t Pay the AMT, America’s Rich-Person Tax?," 18 May 2018 Before the new rules, taxpayers who itemized could write off an unlimited amount of state and local taxes, unless disallowed under the alternative minimum tax. Robyn A. Friedman, WSJ, "New Tax Laws Have Home Buyers Checking New Places," 7 June 2018 Those who pay the alternative minimum tax -- a kind of parallel tax designed to prevent relatively high earners from reducing their income taxes too much -- wouldn’t get the benefit. John Voskuhl,, "IRS Sets Conditions for Deducting 2018 Property Taxes This Year," 27 Dec. 2017 Among other changes, the Democrats would restore the estate tax exemption at $11 million for couples, rather than double that, as became law under the GOP bill, and revive the alternative minimum tax. Washington Post, "Democrats would reverse some tax cuts to fund infrastructure," 7 Mar. 2018 Exploration Expenses The law's repeal of the alternative minimum tax for businesses will eliminate the ability to amortize exploration costs, according to Bloomberg Intelligence. Bloomberg, Houston Chronicle, "Is tax overhaul really a good deal for Big Oil?," 8 Jan. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'alternative minimum tax.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

See More

First Known Use of alternative minimum tax

1958, in the meaning defined above

Keep scrolling for more

Learn More about alternative minimum tax

Share alternative minimum tax

Statistics for alternative minimum tax

Last Updated

11 Dec 2018

Look-up Popularity

Time Traveler for alternative minimum tax

The first known use of alternative minimum tax was in 1958

See more words from the same year

Keep scrolling for more

More Definitions for alternative minimum tax

alternative minimum tax


Financial Definition of alternative minimum tax

What It Is

The alternative minimum tax (AMT) is income tax owed using a parallel tax code designed to ensure that every taxpayer, particularly rich ones and corporations, pay at least some income tax each year.

How It Works

Congress created the AMT in 1969 as a way to ensure that people with high incomes and corporations could not avoid taxes by using various tax shelters.

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.

[InvestingAnswers Feature: The Most Important Tax Changes to Know Before Filing Your Tax Return]

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]

Source: Investing Answers

alternative minimum tax


Legal Definition of alternative minimum tax 

: a federal tax that prevents a person or entity (as a corporation) with taxable income from avoiding tax liability and that imposes tax liability in the amount of the excess of the tentative minimum tax over regular tax liability — see also tax preference item

Comments on alternative minimum tax

What made you want to look up alternative minimum tax? Please tell us where you read or heard it (including the quote, if possible).


to enclose within walls

Get Word of the Day daily email!

Test Your Vocabulary

Late Autumn 2018 Words of the Day Quiz

  • frosted-autumn-leaves
  • Which is a synonym of yahoo?
True or False

Test your knowledge - and maybe learn something along the way.


Test Your Knowledge - and learn some interesting things along the way.


Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!