Income Tax in The United States - Alternative Minimum Tax

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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