What defines the alternative minimum tax (AMT)?

The alternative minimum tax (AMT) is designed to ensure that taxpayers pay a minimum level of tax, regardless of their income or the deductions, credits, and exclusions they may claim. This was established to prevent high-income individuals from using deductions and credits to reduce their tax liability to a very low level, essentially taking advantage of the tax system.

By implementing the AMT, the tax code requires certain taxpayers to calculate their tax liability under two different systems: the regular tax system and the AMT system, and then pay the higher of the two amounts. This provision ensures that individuals, even if they have significant deductions or credits, guarantee a baseline tax payment, thereby promoting tax equity among taxpayers.

The other options do not describe the AMT accurately: it’s not a tax exemption, nor is it exclusively targeted at high-income earners, as it can apply to middle-income earners too, and it certainly does not serve as a method for tax evasion.