The alternative minimum tax (AMT)

The alternative minimum tax (AMT) is an extra tax that certain taxpayers must pay in addition to their regular income tax. The purpose of the AMT is to prevent taxpayers with substantial income from using tax "loopholes" (such as certain exclusions, deductions, and credits) to pay little or no tax. Through the AMT, these taxpayers must pay at least a minimum amount of tax.

The AMT is based on an alternative set of rules for calculating income tax. A separate accounting method is used to govern the recognition and timing of income and expenses. If you're subject to the AMT, you must compute both your regular tax and your AMT. If your AMT liability is greater than your regular income tax liability, the difference is reported as an additional tax on your federal income tax return. In effect, you're liable for either the AMT or the regular income tax, whichever amount is higher.

Generally, AMT may apply to individuals earning more than $40,250. AMT also applies to people who have a large amount of standard or personal exemptions, exercised incentive stock options, who take a net operating loss deduction, who have certain other types of income, or claimed certain business-related tax credits. AMT is calculated using Form 6251 and the Instructions for Form 6251. read more......

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