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Alternative minimum tax
Alternative minimum tax rules have been devised to ensure that at least a minimum amount of income tax is paid by corporate and high-income noncorporate taxpayers (including estates and trusts) who reap large tax savings by making use of certain tax deductions and exemptions. A taxpayer's AMT for a tax year is the excess of the tentative minimum tax over the regluar tax and must be paid in addition to year-end tax liability. The tentative minimum tax is determined by multiplying the excess of a taxpayer's alternative minimum taxable income over an exemption amount by 26 percent for adjusted gross income up to $186,300 and 28 percent for AGI in excess of $186,300 (20 percent for corporate taxpayers), and then reducing the product by the taxpayer's alternative minimum tax foreign tax credit. AMTI is computed by taking taxable income (including unrelated business taxable income, real estate investment trust taxable income, life insurance company taxable income, or any other income base used to calculate regular tax liability), adding or subtracting special adjustments, and adding tax preference items.