High-income households who have sufficient adjustments,deductions and credits to reduce their income tax liability to low levels may instead be subject to the ______ so that they pay a more appropriate level of taxes based on their gross income.

Question

Quizplus · Accepted Answer

The alternative minimum tax (AMT) is a separate tax system that was created to ensure that taxpayers who have a high number of adjustments, deductions, and credits and who would otherwise pay little or no income tax, pay a minimum amount of tax. The AMT limits the amount of certain deductions that can be taken and requires taxpayers to calculate their tax liability according to a set of rules that are different from the standard tax calculations. Therefore, high-income households who have reduced their income tax liability using various tax breaks may still owe taxes under the AMT system.

Option B is incorrect because the value-added tax (VAT) is a type of consumption tax that is added to goods and services at every point of sale. VAT is not related to income tax liability.

Option C is incorrect because there is no such thing as a progressive adjusted tax. However, the term "progressive tax" refers to a tax system where the tax rate increases as the income of the taxpayer increases.

Option D is incorrect because there is no such thing as a gross adjusted tax.

High-Income Households Who Have Sufficient Adjustments,deductions and Credits to Reduce