Which U.S. tax system requires a separate calculation to limit certain deductions and preferences?

The U.S. alternative minimum tax requires taxpayers to perform a separate calculation that limits or disallows certain deductions and tax preferences.

Congress created the original alternative minimum tax in 1969 after Treasury reports showed that some wealthy taxpayers owed little or no federal income tax because of extensive deductions and preferences. The modern system developed from that earlier measure.

Taxpayers generally calculate their liability under the regular income-tax rules and under AMT rules, then pay whichever amount is higher. The AMT has separate exemption amounts, rates, and rules for items such as certain deductions and incentive stock options.

The tax was once aimed mainly at high-income households, but its reach expanded because exemption thresholds were not automatically indexed for inflation. A 2017 law substantially changed the thresholds, reducing the number of affected taxpayers for a period.