Legal Definitions - AMT

Definition: AMT stands for Alternative Minimum Tax. It is a way of calculating taxable income after certain deductions and tax preferences are taken into account. The purpose of AMT is to ensure that high-income individuals and entities pay a minimum amount of income tax, regardless of any tax breaks they may receive.

For example, let's say a wealthy individual has a lot of deductions and tax credits that reduce their taxable income to a very low amount. Without AMT, they might end up paying little or no income tax. However, with AMT, they would still have to pay a minimum amount of tax, even if it means losing some of their deductions and credits.

Another example would be a corporation that has a lot of tax breaks and loopholes that allow them to reduce their taxable income. AMT would ensure that they still pay a minimum amount of tax, even if it means losing some of those tax breaks.