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AMT: when required, differences, preferences v adjustments

When is a taxpayer required to pay the AMT? What are the differences between the AMT and regular tax? What are the differences between tax preferences and adjustments concerning the AMT? What are some examples of each?

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The theory of the alternative minimum tax is there shall be a separate method for determining income tax for higher-earning individuals (and corporations) that have offset their income with certain allowable tax deductions which effectively minimized the amount of regular income tax calculated on taxable income. The AMT, with a different set of rules, makes sure that these types of tax payers will not escape paying some income tax. The calculations are done using AMT rates of 26 and 28 percent while comparing the amount of tax calculated using the regular rate structure.

The concept is relatively simple, but the application can be very complex.

When is a taxpayer required ...

Solution Summary

In a 400+ word solution, the explanations clearly respond to the questions in explaining the alternative minimum tax and its aplications. Examples are included to further define terms.