Alternative Minimum Tax

What Does Alternative Minimum Tax Mean?

The alternative minimum tax serves as an alternative to standard tax rates. It applies only when a taxpayer’s deductions are so numerous that they would otherwise be exempt from paying most taxes. In such cases, the taxpayer pays the alternative minimum tax instead of the amount they would have owed under the standard tax system.

Insuranceopedia Explains Alternative Minimum Tax

The alternative minimum tax is primarily aimed at targeting the very wealthy, although it can sometimes apply to individuals with smaller amounts of wealth.

Insurance-related deductions and income can reduce a person’s overall taxable income. If this reduction is substantial enough, they may be required to pay the alternative minimum tax.