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Income Tax Act s. 127.5

Alternative Minimum Tax and the Detailed Canadian Tax Calculator

2024 Alternative Minimum Tax Changes

2023 and Earlier Canadian Dividends No Tax

- Eligible Dividendsand Alternative Minimum Tax

- Non-EligibleDividends (Regular Dividends) and Alternative Minimum Tax

Canada Revenue Agency (CRA) Resources

AlternativeMinimum Tax and the Detailed Canadian Tax Calculator

Our Canadian taxcalculator calculates alternative minimum tax.

Alternative Minimum Tax does not apply in the year of death - our Canadiantax calculator does not provide an option for this.

AMT is currently calculated on form T691Alternative Minimum Tax.

2024 Alternative Minimum Tax Changes

As proposed by the Federal 2023 Budget, changeswere made to the AMT calculation effective January 1, 2024. A resultof the changes to the AMT is that when Canadian dividends are the only incomefor a taxpayer, AMT does not apply at any level of dividends. This isbecause the regular tax is more than the AMT at any level of dividends.

Effective for tax yearsbeginning after 2023:

	AMT exemption raised from $40,000 to start of 4th tax bracket ($173,205 in 2024)
	AMT rate increased from 15% to 20.5%
	50% of deductions for CPP, child care and moving expenses are disallowed in the AMT calculation.
	50% of most non-refundable tax credits are dis allowed in the AMT calculation. Previously 100% could be claimed.
	the AMT capital gains inclusion rate is increased from 80% to 100%, with capital loss carry forwards and allowable business investment losses remaining at 50% rate
	100% of the benefit associated with employee stock options is included in the AMT base.
	Only 80% of the donation tax credit is allowed to reduce the AMT. Previously 100% could be claimed.
	include 30% of capital gains on donations of publicly listed securities in the AMT base. The 30% rate would also apply to the full benefit associated with the employee stock options to the extent that a deduction is available.

See also AlternativeMinimum Tax (AMT) and Donation of Securities

For further information see the following:

AlternativeMinimum Tax (AMT) for High-Income Individuals from Budget 2023

Budget2024 Alternative Minimum Tax Changes for further changes in addition to theBudget 2023 changes.

Helpful Resources:

For a good summary of the new Alternative Minimum Tax with someexamples, see Will you or your trust be affected by changes to the alternative minimum tax?from Grant Thornton LLP, updated June 21, 2024.

Charitablegiving: How changes to AMT may impact your donations from Grant Thornton LLP,updated June 21, 2024.

DraftLegislation including Alternative Minimum Tax changes, and the related August4, 2023 News Release.

Noticeof Ways and Means Motion which includes changes to the AMT, and which becameBillC-69, Budget Implementation Act, 2024, No. 1 was tabled and past firstreading, receiving Royal Assent on June 20, 2024. It includes the changes to AMT.

2023 and Earlier Canadian Dividends No Tax

Alternative Minimum Tax 2023 and Earlier re Canadian Dividends

In this article, we talk about what can be earned in Canadian eligible or non-eligible dividends before regular federal or provincial taxes are payable, and before alternative minimum tax applies, if there is no income other than the eligible or non-eligible dividends. The results shown are for a single person.

Eligible Dividendsand Alternative Minimum Tax

In 2023:

	regular federal taxes start to be payable when actual eligible dividends reach the amount of $68,558 (2022 $65,061) at this point there is $2,033 (2022 $1,599) of federal AMT payable.
	AMT starts when the dividends reach $55,002 (2022 $54,403). Federal AMT is applicable for dividends above this amount, until the amount of the dividends reaches $175,218 (2022 $161,215), when the regular federal tax equals or exceeds the minimum amount.

In the following table:

the federal row for eligible dividends shows the amount of actual dividends that can be earned before regular federal tax is payable for a single person with only the basic personal amount tax credit, if there is no income other than the dividends.

the provincial information shows the amount of actual dividends that can be earned in each province before any regular provincial income tax (net of any low income tax reduction) is payable. However, if this amount exceeds the amount of dividends at which federal AMT is payable ($54,403 in 2022), AMT will be payable for all provinces except Quebec, which does not base its AMT on the federal AMT. the provincial information also shows the total amount of regular federal income tax, plus federal and provincial AMT payable at the indicated amount of dividends.

The 2023/2022 amounts are based on rates known as of June 13, 2023.

Notes:

(1) ON excludes Ontario Health Premium. The 2022 Federal tax + AMTfor ON has been revised since this article was published in September 2022.

(2) QC excludescontribution to the health services fund, health contribution, and prescriptiondrug insurance plan premiums.

(3) Refundable tax credits are excluded.

(4) Provincial AMT is calculated as a % of federal AMT,except for Quebec. Thus, even though the eligibledividends may not reach the taxable level in a particularprovince, they will still be subject to AMT if there isfederal AMT. The BC, NL and ON AMTrates are calculated as lowest provincial tax rate / lowestfederal tax rate. Quebec's AMT is not based on the federalAMT, and Canadian dividends, eligible or non-eligible (small business) do not incurprovincial AMT inQuebec.

See our tables of dividend tax credit rates for eligible dividends by year from 2007 to present for every province & territory, for dividend tax credit rates for each province and territory.

The above table only relates to AMT regarding eligible Canadian dividends. AMT may be applicable in othersituations when taxpayers have high incomes, yet have littletax payable on the income. The exemption level forfederal AMT is $40,000.

For more information onalternative minimum tax, see the Canada Revenue Agency information on Minimum Tax web page. The AMT is calculated on form T691.

Non-EligibleDividends (Regular Dividends) and Alternative Minimum Tax

In the following table:

	the federal column for non-eligible dividends shows the amount of actual dividends that can be earned before regular federal tax is payable, if there is no income other than the dividends.
	the provincial columns show the amount of actual dividends that can be earned in each province before any regular provincial income tax (net of any low income tax reduction) is payable. Alternativeminimum tax (AMT) is not incurred at any level of these dividends.

The 2023/2022 amounts are based on rates known as of June 13, 2023. The2022 amounts for NL and SK have been revised from the amounts published inSeptember 2022.

(1) ON excludes Ontario Health Premium.

(2) QC excludes contribution to the health services fund, health contribution, and prescription drug insurance plan premiums.

See our tables of rates for non-eligible(small business) dividends, which shows the dividend tax rates for 2007 topresent for each province and territory.

See our article on non-eligible(small business) dividends for more information.

To see the tax results for your own income situation, andhow it would change if the type of investment income changes, use our IncomeTax Planning Calculators, in particular the InvestmentIncome Tax Calculator.

For a comparison of taxes for all provinces and territories for 2021 andearlier years, including marginal tax rates for eligible and non-eligibledividends, capital gains and other income, see the BasicCanadian Tax Calculator.

Canada Revenue Agency (CRA) Resources

MinimumTax

FormT691 Alternative Minimum Tax

Tax Tip: Everyone's situation differs. Seek the advice of a professional tax advisor if you think there is a possibility you may be subject to alternative minimum tax.

Revised: July 14, 2024