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?
Alternative minimum tax is 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 taxpayers 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 ...
The solution explains the theory and application of the AMT as compared to the regular tax structure. The types of differences between regular taxable income and alternative minimum taxable income are discussed in both theory and with examples. This solution is 396 words. n