Alternative Minimum Tax (AMT)

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Under US tax law, certain tax benefits such as deductions, credits, and exemptions can significantly reduce a taxpayer's regular tax amount. The IRS created the alternative minimum tax (AMT) to make sure that high-income individuals and corporations pay at least a minimum amount in taxes by setting a limit on those reductions.  If the alternative minimum tax is higher than the regular tax owed for the year, then the high-income earner must make up the difference by paying the alternative minimum tax.

[Last updated in May of 2020 by the Wex Definitions Team]