An alternative minimum tax (AMT) is a tax that ensures that taxpayers pay at least the minimum.
This is a special tax that prevents people with high incomes from abusing deductions and credits to pay little or no income tax.
In 1969: The U.S. Congress noticed that many people who had high incomes were legally using a variety of tax deductions and loopholes to reduce their federal tax liability to zero.
Congress established the minimum tax renamed the AMT.
AMT preference items include deductions for state and local taxes, personal exemptions, and deductions for miscellaneous business expenses, Common tax preference items that are added back to income to calculate the AMT:
The exercise of incentive stock options.
Claiming multiple dependents, especially for joint filings.
Claiming business depreciation.
Taking out a home equity loan for something other than home improvements.
Claiming deductions for investment expenditures or unreimbursed employee business expenses.