Please explain the differences between these two tax systems.

Hello bluesteel101:

Thanks for the interesting question. 

I've done some searching for you on the subject of Alternative Minimum
Tax (AMT) and the easiest to understand information on how it differs
from the regular tax system is *not* found on government sites.

The two best explanations I've found are at:

Alternative Minimum Tax 101
URL: http://www.fairmark.com/amt/amt101.htm
Quote: "First, you figure the amount of tax you would owe under a
different set of rules. What's different about these rules? Broadly
speaking, three things:
* Various tax benefits that are available under the regular tax are
reduced or eliminated.
* You get a special deduction called the AMT exemption, which is
designed to prevent the AMT from applying to taxpayers with modest
income. This deduction phases out when your income reaches higher
levels, a fact that causes significant problems under the alternative
minimum tax.
* You calculate the tax using AMT rates, which start at 26% and move
to 28% at higher income levels. By comparison, the regular tax rates
start at 10% and then move through a series of steps to a high of 35%.
The result of this calculation is the amount of income tax you would
owe under this 'alternative' system of tax."

The Alternative Minimum Tax
URL: http://www.smartmoney.com/tax/filing/index.cfm?story=amt
Quote: "The AMT also ignores some itemized deductions, such as
investment expenses and employee business expenses, and some medical
and dental expenses. It also counts as income the interest from
private-activity bonds, a type of tax-exempt bond issued by
governments, usually to finance sports stadiums and the like. Finally,
AMT rules force you to pay taxes on the "spread" between the market
price and the exercise price of incentive stock options granted by
your employer. For example, if you exercised an option to buy 100
shares of stock for $3 a share and the stock was trading at $10, the
spread would be $7 a share, or $700. Under the regular rules, you
wouldn't pay current taxes on that amount, but under the AMT, it's
considered income."

Please read both these pages in their entirity - they both contain a
lot of valuable information.

If you need further clarification, please specify of what nature and
I'd be more than happy to help.

Search Strategy (on Google):
* "alternative minimum taxes" 
* "alternative minimum taxes" site:.gov 
* "alternative minimum tax" site:.gov 

Thanks. 

websearcher

Great Help!
Thanks!