With the recent release of President Trump's 2005 tax return, many millions of Americans were introduced to the Alternative Minimum Tax (AMT). In fact, of the $38.4 million Trump paid in taxes in 2005, $31 million came from the AMT. With the AMT in the news, this is a good time to look at why the AMT exists, as well as potential pitfalls associated with the law.
The purpose of the AMT
As the name implies, the AMT forces taxpayers who reach certain income thresholds to pay some minimum amount of income tax. With an AMT, higher earners and the wealthiest should not, at least in theory, avoid paying income tax through the use of various deductions. All taxpayers, including individuals, families and businesses could be subject to the AMT if their income reaches certain levels. As a result, taxpayers should calculate their taxes under both the standard tax laws and the AMT.