Series 50: Alternative Minimum Tax

Alternative Minimum Tax

Qualified private activity bonds are also known as alternative minimum tax bonds because, unlike public purpose bonds, they are subject to the alternative minimum tax. Some investors (but not all) must pay federal income tax on their earnings from AMT bonds. Taxes on AMT bonds apply to relatively well-to-do bondholders in the higher income brackets.

The AMT is an alternate way of calculating income taxes. It was created as a backstop to close tax loopholes by setting a floor on the income tax liability of well-to-do taxpaye