What is Alternative Minimum Tax (AMT)?

Whenever many people file their taxes, they find themselves asking "What is alternative minimum tax?" Here are the basics of the alternative minimum tax and how it can impact you.

Alternative Minimum Tax

The alternative minimum tax is a tax that is not applicable to every taxpayer. Originally, this tax was created in order to make sure that certain high income families still paid taxes. It was enacted in 1969 when it was discovered that many high income families had so many tax benefits that they did not actually pay any taxes.

Application

It is difficult to know in advance whether you will have to pay the alternative minimum tax. Although it was originally created in order to tax high income families, it can affect many other people today. Whenever you are filing your taxes, a different set of standards will be used in order to determine if you owe the alternative minimum tax. You will have to determine your tax eligibility under the alternative minimum tax code and the regular tax code. At that point, you are going to have to pay whichever amount is higher. For the majority of taxpayers, the traditional tax will be higher, but some people have to pay more for the alternative minimum tax.

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