Alternative Minimum Tax

The Alternative Minimum Tax (AMT) system exists as a parallel income tax system in the United States. The AMT system uses different rules for determining taxable income and allowable deductions, and uses a simple 26/28% rate calculation to determine the Tentative Minimum Tax (TMT). The TMT is compared to the income tax amount calculated for the taxpayer; if the regular income tax amount is greater than the TMT, no special action is required. If the TMT is greater than the tax calculated using the regular rules, the difference between the TMT and the regular tax is added to the regular tax amount, so that the taxpayer is obligated to pay the full amount of the TMT, though some of that tax is considered regular tax and some is considered AMT. The portion of the tax which is considered AMT may be available in later years as a Minimum Tax Credit, reducing the regular income tax due in later years, but only to the taxpayer's TMT level in those later years.