What Is the Alternative Minimum Tax (AMT)?

The Alternative Minimum Tax (AMT) is a parallel tax system designed to ensure high-income taxpayers pay at least a minimum amount of tax, even if they have many deductions. You calculate your taxes both ways and pay whichever is higher. The AMT disallows certain deductions — like the SALT deduction — that are allowed under regular tax rules. Most middle-income taxpayers don't owe AMT thanks to a generous exemption that phases out at higher incomes. Exercising incentive stock options (ISOs) is a common AMT trigger.