Alternative Minimum Tax
ALTERNATIVE MINIMUM TAX
ALTERNATIVE MINIMUM TAX
The alternative minimum tax (AMT) is an income tax imposed by the United States federal government on individuals, corporations, estates and trusts. AMT is imposed at a nearly flat rate on the adjusted amount of taxable income above a certain threshold (also known as exemption). Note that this exemption is substantially higher than the exemption from regular income tax. Regular income tax is adjusted for certain items computed differently for AMT, such as depreciation and medical expenses. No deduction is allowed for state taxes or miscellaneous itemized deductions in computing AMT income. Taxpayers with incomes above the exemption whose regular Federal income tax is below the amount of AMT must pay the higher AMT amount. [1]
Certain sources identify the introduction of the AMT into the United States Income Tax Code as enacted in 1982. However a predecessor “minimum tax” was enacted in May1969; imposed an additional tax on certain tax benefits for certain taxpayers. AMT was created to reduce the ability of individuals to escape payment of tax on income by using tax preferences (e.g., items excluded from income subject to tax) available under the regular tax system. A type of minimum tax was first enacted in 1969, under the Nixon administration, following congressional testimony by Joseph Barr the then Secretary of the Treasury reporting that 155 high-income individual paid no federal income tax in 1966 considering gross income of over $200,000. [2] In inflation adjusted terms, those 1966 incomes would be roughly $1.17 million in today’s dollars. This tax avoidance by a few high-income taxpayers was widely perceived as unfair. Rather than directly addressing the problem by eliminating the deductions and credits in the tax code that were leading to the tax avoidance, Congress laid an additional layer of complexity under
ALTERNATIVE MINIMUM TAX
The alternative minimum tax (AMT) is an income tax imposed by the United States federal government on individuals, corporations, estates and trusts. AMT is imposed at a nearly flat rate on the adjusted amount of taxable income above a certain threshold (also known as exemption). Note that this exemption is substantially higher than the exemption from regular income tax. Regular income tax is adjusted for certain items computed differently for AMT, such as depreciation and medical expenses. No deduction is allowed for state taxes or miscellaneous itemized deductions in computing AMT income. Taxpayers with incomes above the exemption whose regular Federal income tax is below the amount of AMT must pay the higher AMT amount. [1]
Certain sources identify the introduction of the AMT into the United States Income Tax Code as enacted in 1982. However a predecessor “minimum tax” was enacted in May1969; imposed an additional tax on certain tax benefits for certain taxpayers. AMT was created to reduce the ability of individuals to escape payment of tax on income by using tax preferences (e.g., items excluded from income subject to tax) available under the regular tax system. A type of minimum tax was first enacted in 1969, under the Nixon administration, following congressional testimony by Joseph Barr the then Secretary of the Treasury reporting that 155 high-income individual paid no federal income tax in 1966 considering gross income of over $200,000. [2] In inflation adjusted terms, those 1966 incomes would be roughly $1.17 million in today’s dollars. This tax avoidance by a few high-income taxpayers was widely perceived as unfair. Rather than directly addressing the problem by eliminating the deductions and credits in the tax code that were leading to the tax avoidance, Congress laid an additional layer of complexity under