Brief Explanation of Minimum Alternative tax (MAT):
Minimum alternative tax is also a federal tax, imposed in United States of America. Two types of MAT's exist. One for companies and other for individuals. MAT for individuals in illustrated below:
This tax has been imposed under 26U.S.C & 55 and do not allow the exemptions and deductions that are allowed while calculating normal tax liability. MAT's rate starts from 25% to 27%.MAT was introduced by Tax reform Act 1969 and was imposed in 1970.Its aim was to trap 155 wealthy tax class that were given so many exemptions and deductions under normal tax.
In recent years AMT has gained much attention because it does not prone to inflation and tax holidays. Most of its taxpayers are moderate income tax payers.
The AMT resembles with flat tax of 28% on gross income over $175,000 add 26% on less than $175,000 less any exemptions allowed. But the taxpayer has to file separate return for this tax on form 6251.
Also its set-off is different from regular tax; and exemptions, deductions; allowances are not defined as so in regular tax.
Like all other taxes, MAT is also tried to be avoided. The solution to the problem is to have less & less tax preference deduction from other sources like Real Estate and state income taxes.
Minimum alternative tax is also a federal tax, imposed in United States of America. Two types of MAT's exist. One for companies and other for individuals. MAT for individuals in illustrated below:
This tax has been imposed under 26U.S.C & 55 and do not allow the exemptions and deductions that are allowed while calculating normal tax liability. MAT's rate starts from 25% to 27%.MAT was introduced by Tax reform Act 1969 and was imposed in 1970.Its aim was to trap 155 wealthy tax class that were given so many exemptions and deductions under normal tax.
In recent years AMT has gained much attention because it does not prone to inflation and tax holidays. Most of its taxpayers are moderate income tax payers.
The AMT resembles with flat tax of 28% on gross income over $175,000 add 26% on less than $175,000 less any exemptions allowed. But the taxpayer has to file separate return for this tax on form 6251.
Also its set-off is different from regular tax; and exemptions, deductions; allowances are not defined as so in regular tax.
Like all other taxes, MAT is also tried to be avoided. The solution to the problem is to have less & less tax preference deduction from other sources like Real Estate and state income taxes.
