What Triggers the Alternative Minimum Tax (AMT)?

The alternative minimum tax was created in 1969 to prevent high-income taxpayers from using loopholes and deductions to avoid paying taxes.

Several factors can trigger AMT liability, including high income, large deductions and financial activities that create differences between regular taxable income and the income calculated under the AMT system.

Common triggers include bringing in substantial earnings, taking significant itemized deductions and exercising incentive stock options.

Alternative minimum tax is a distinct tax system designed to ensure that high-income individuals pay a minimum level of taxes.

Placing different asset types in accounts based on their tax treatment can reduce tax exposure.

Tax-efficient investments, like index funds and municipal bonds, are best held in taxable accounts.