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Finance Glossary

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Alternative Minimum Tax - AMT


It might sound like a tax invented for Coachella, but it's really a tax created to make sure that the rich pay their fair share. It has nothing to do with "alternative" or "minimum" anything, really. Created by Congress and the IRS, AMT adds stuff back to the "adjusted gross income" line of your IRS tax return. If you’re really rich, you might find that you can't claim the same deductibles you did before—and you'll probably end up paying more taxes.

AMT ignores one basic thing: the rich don’t fill out the "adjusted gross income" line of their tax forms.

They have people who do that for them... people who incidentally know tax laws really well and can find loopholes anyway. Thanks to the fact that AMT is complex and not really doing much, there was much grumbling about it (as there is with any tax). In response, President Obama signed a law in 2013 that was supposed to be a patch to fix some of the problems. People kept grumbling anyway.