Business, Legal & Accounting Glossary
The US Congress introduced alternative minimum tax (AMT) in 1970 to prevent high-income taxpayers from lowering their tax liability through excessive tax loopholes. Form 1040 and 1040A include worksheets that help to determine alternative minimum tax liability. Form 6251 is then used to calculate the tentative minimum tax. Any excess is to be added to the regular tax as alternative minimum tax. Since the alternative minimum tax is not indexed for inflation, over the years it has started affecting more middle-income taxpayers especially those claiming higher deductions, exemptions, and credits. The alternative minimum tax provisions treat these situations differently. There are only two levels of alternative minimum tax: 26% and 28%. Taxpayers may claim credit for the alternative minimum tax paid in previous years provided they have also submit Form 8810.
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This glossary post was last updated: 4th February, 2020