Alternative Minimum Tax (AMT)

AMT can be thought of as a different tax system with different rules and deductions; taxpayers must compute their taxes under both the regular tax and AMT rules and then pay the greater of the two. The purpose of the AMT is to prenvet those in the higher tax bracket from getting by from year to year tax free. A consequence is that many unsuspecting taxpayers who make less than $100,000 a year with certain kinds of investments and deductions end up having to pay the AMT. Investing in certain types of businesses can trigger the AMT.