The tax law gives preferential treatment to some kinds of income and allows special deductions and credits for some kinds of expenses. The alternative minimum tax (AMT) attempts to ensure that all individuals who benefit from these tax advantages pay at least a minimum amount of tax. The alternative minimum tax is a separate tax computation that, in effect, reduces the benefit of certain deductions and credits, thus creating a tax liability for an individual who would otherwise pay little or no tax.
A taxpayer may have to pay the alternative minimum tax if income for regular tax purposes, plus any of the adjustments and preference items that apply, is more than a specified exemption amount. To determine if the taxpayer may be subject to the alternative minimum tax, refer to the Form 1040 instructions and Form 6251.
Note: AMT adjustments differ from preferences. Adjustments involve a substitution of AMT treatment of an item for the regular tax treatment. A preference involves the addition of the difference between the AMT treatment and the regular tax treatment. Some (but not all) adjustments can be negative amounts, i.e., they may result in alternative minimum taxable income that’s less than taxable income. Tax preferences can’t be negative amounts.
