What does the AMT do?

The concept of an Alternative Minimum Tax (AMT) serves as a safeguard mechanism within the tax system, ensuring that taxpayers contribute a minimum amount to the government regardless of their eligibility for deductions or credits.

The AMT establishes a threshold or 'floor' for taxation, which individuals and corporations must meet in addition to their regular tax obligations. This measure is designed to prevent high-income earners from significantly reducing their tax burden through extensive deductions and credits.

Unlike the standard tax calculation, the AMT applies a separate formula that disregards certain deductions and exemptions commonly used to lower taxable income. This approach ensures that a base level of tax is paid, regardless of how taxpayers structure their finances.

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