Plain-English definitions for the terms you'll encounter on your financial journey.
A supplemental income tax that sets a floor on the percentage of taxes that must be paid by certain high-income individuals. It ensures these taxpayers do not use excessive deductions to avoid paying a minimum amount of tax.
A parallel tax system designed to ensure that higher-income taxpayers who benefit from specific exclusions, deductions, and credits pay at least a baseline amount of tax. It recalculates income tax under a different set of rules with fewer allowable deductions.
Alternative Minimum Tax is a special tax calculation designed to ensure that wealthy individuals who use many tax breaks still pay at least a baseline amount of income tax to the government.