Simple English definitions for legal terms
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Term: AMT
Definition: AMT stands for Alternative Minimum Tax. It is a way of calculating how much tax someone should pay based on their income and certain deductions. The AMT makes sure that even if someone gets special tax breaks, they still have to pay a minimum amount of tax if they earn a lot of money.
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.