Alternative Minimum Tax
Taxpayers must pay the higher of the regular income tax or the Alternative Minimum Tax (AMT). Taxpayers who have paid AMT in prior years may claim a credit against regular tax for the prior AMT. The credit is limited so that regular tax is not reduced below current year AMT.
AMT is imposed at a nearly flat rate (20% for corporations, 26% or 28% for individuals, estates, and trusts) on taxable income as modified for AMT. Key differences between regular taxable income and AMT taxable income include:
- The standard deduction and personal exemptions are replaced by a single deduction, which is phased out at higher income levels,
- No deduction is allowed individuals for state taxes,
- Most miscellaneous itemized deductions are not allowed for individuals,
- Depreciation deductions are computed differently, and
- Corporations must make a complex adjustment to more closely reflect economic income.
Read more about this topic: Income Tax In The United States
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