How changes to the alternative minimum tax system could affect Canadians

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How changes to the alternative minimum tax system could affect Canadians
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How changes to the alternative minimum tax system could affect Canadians via financialpost

better target the AMT to high-income individuals

The current AMT rules apply a flat 15-per-cent tax rate to this adjusted taxable income. For 2024, the AMT rate will increase to 20.5 per cent. To ensure that lower-income taxpayers aren’t caught by the AMT, there is an AMT exemption that is deducted from adjusted taxable income. The exemption is currently $40,000, but will rise to approximately $173,000 in 2024.Article content

In addition, starting in 2024, only 50 per cent of the non-refundable tax credits, including the donation tax credit, will be allowed when calculating the AMT. A notable exception to this is the dividend tax credit, which is already disallowed entirely for AMT purposes. Article content Consider Carly, who sells her vacation property with a fair market value of $500,000 and an adjusted cost base of $100,000, to realize a $400,000 capital gain. Under the regular tax system, 50 per cent of the capital gain, or $200,000, is included in her taxable income. Using graduated tax rates, her estimated 2024 tax would be $43,603.

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