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Simple English definitions for legal terms
alternative minimum tax
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A quick definition of alternative minimum tax:
Alternative Minimum Tax: A type of tax that some people have to pay in addition to their regular income tax. It was created to make sure that people who have a lot of deductions and credits still pay a minimum amount of tax. It can be complicated and confusing, but it's important to understand if you might have to pay it.
A more thorough explanation:
The Alternative Minimum Tax (AMT) is a type of tax that is imposed by the government on individuals, entities, transactions, or property to generate public revenue. It is an additional tax that is calculated separately from the regular income tax and is designed to ensure that high-income taxpayers pay a minimum amount of tax.
- If a taxpayer has a high income but has taken advantage of many tax deductions and credits, they may be subject to the AMT.
- A corporation that has a lot of tax breaks and deductions may also be subject to the AMT.
These examples illustrate how the AMT is designed to prevent high-income taxpayers from avoiding paying their fair share of taxes by taking advantage of tax breaks and deductions.
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