What defines the alternative minimum tax (AMT)?

The alternative minimum tax (AMT) is designed to ensure that taxpayers, particularly those with high incomes, pay a minimum level of tax, regardless of the deductions and credits they might claim. This tax system operates alongside the regular tax calculations, providing an additional layer of tax liability that might apply to individuals who benefit disproportionately from various tax breaks, ultimately leading to a significantly reduced overall tax obligation.

AMT functions by requiring those subject to it to calculate their tax liability under two systems: the regular tax and the AMT. If the AMT calculation results in a higher tax liability, the taxpayer is required to pay the higher amount. This ensures that high-income earners contribute a fair share toward federal revenue, especially if their tax planning strategies allow them to significantly lower their taxes under the regular system.

By focusing specifically on high-income individuals and closing loopholes, the AMT aims to create a more equitable tax structure. This is why the correct response highlights that AMT is a tax calculation to ensure that these individuals do not avoid paying at least a minimum level of tax.