Alternative Minimum Tax (AMT)
TaxGlossary term
Definition
A parallel tax system designed to ensure high-income taxpayers pay at least a minimum amount of tax, even after deductions and credits. It recalculates income tax by adding back certain deductions like state and local tax deductions and applies a separate set of rates.
Related terms
- Tax BracketThe range of income subject to a certain income tax rate in the progressive US tax system. Higher income levels are taxed at higher rates (marginal tax rates).
- Itemized DeductionsSpecific expenses that can be deducted from taxable income, including mortgage interest, charitable donations, and medical expenses. Must exceed the standard deduction to be beneficial.
- SALT DeductionThe State and Local Tax deduction allows taxpayers to deduct state income, sales, and property taxes from their federal taxable income. Currently capped at $10,000 per year for individuals and married couples filing jointly.
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