alternative minimum tax (AMT)

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Alternative minimum tax (AMT) can be defined as a tax mechanism that calculates taxable income after certain deductions and tax preferences are made. The AMT is imposed in addition to the regular income tax for certain individuals, estates and trusts

The AMT ensures that high-income individuals and entities pay a certain amount of income despite favorable tax treatment. The aim of the AMT is to guarantee that certain taxpayers pay their fair share or at least the minimum owed, and it only applies when income reaches a certain level (for instance, $113,400 for couples filing jointly in 2020).

[Last updated in November of 2021 by the Wex Definitions Team]