What is the alternative minimum tax (AMT)?

The alternative minimum tax (AMT) was designed to primarily affects high-income taxpayers who use tax shelters or who shelter some of their income from tax through certain tax preference items or adjustments, such as accelerated depreciation, certain tax-exempt interest, itemized deductions, research and experimental costs, or the foreign tax credit. However, now more and more people are finding themselves faced with AMT. To find out if you owe AMT, first calculate your taxes using the regular method; then, calculate your taxes again using the AMT method. You pay either regular tax or AMT tax, whichever is higher. If you are using tax preparation software, it will automatically calculate your AMT. However, because the AMT rules are very complex, we encourage you to see a tax professional.