Alternative Minimum Tax (AMT)
A parallel tax calculation that adds back certain preferences; you pay the higher.
What is Alternative Minimum Tax (AMT)?
Taxpayers compute tax under the regular rules and under AMT rules, which disallow or add back certain items, and pay whichever is higher. Preference items include the spread on exercising incentive stock options and interest on certain private activity municipal bonds.
Alternative Minimum Tax (AMT): a worked example
Exercising a large block of ISOs can trigger AMT even though no regular income tax is due.
More terms in Clients, Strategy & Tax
Sole Proprietorship
A business owned by one person with no legal separation from the owner.
General Partnership
Co-owners share management and unlimited liability; income passes through.
Limited Liability Company (LLC)
Limited liability for owners with pass-through taxation by default.
C Corporation
A separate taxpayer - profits taxed at the corporate level, then again as dividends.
S Corporation
A corporation that passes income through to shareholders, avoiding double tax.
Trust & Estate Accounts
Accounts run by a fiduciary - a trustee or an executor - under a governing document.
Foundations & Charities
Tax-exempt organizations investing for a mission, often in perpetuity.
Client Profile & Data Gathering
The financial and nonfinancial facts every recommendation must rest on.