Alternative Minimum Tax (AMT) in Canada: Who Gets Caught After the 2024 Changes
- AMT is a parallel calculation on Form T691. You pay the difference if minimum tax is higher than regular tax. The extra can be carried forward up to seven years against regular tax.
- Since 2024 the rate is 20.5 percent, which is the second federal bracket rate. The basic exemption is the start of the fourth federal bracket. CRA's 2026 brackets put that start at $181,440. CRA's 2025 instructions used $177,882, the 2025 start of the same bracket.
- The exemption does not apply to trusts. A trust can owe AMT on amounts that would be sheltered for a person.
- Ordinary employment income, fully taxed, almost never produces AMT. Preferential income does: large capital gains, the lifetime capital gains exemption, and in-kind gifts of listed securities.
- Provinces and territories generally add their own minimum tax on top of the federal amount. Quebec calculates its version separately. This page is the federal calculation.
Who actually pays alternative minimum tax?
AMT exists so that a large tax preference in one year cannot reduce federal tax to nearly nothing. You compute regular tax. You compute a second tax on a broader base, at a flat rate, above an exemption. If the second number is higher, you pay the difference, on line 41700.
CRA's line 41700 page for the 2025 return tells you that if the relevant income total is $177,882 or less you probably do not owe minimum tax, and if it is higher you complete Form T691. $177,882 is the 2025 start of the 29 percent federal bracket. For 2026, CRA's bracket table starts that same bracket at $181,440. The exemption tracks that threshold. CIBC's May 2026 summary of the rules in force since 2024 uses $181,440 for the 2026 exemption and 20.5 percent for the rate. Use Form T691 for the year you file. Do not reuse a 2025 software file.
| Item | Before 2024 | 2024 and after, including 2026 |
|---|---|---|
| Rate | 15 percent | 20.5 percent |
| Basic exemption for individuals | $40,000 | Start of the fourth federal bracket. $181,440 for 2026. Not available to trusts. |
| Capital gains in the AMT base | 80 percent included | 100 percent included |
| Capital gains on listed securities donated in kind | Zero, matching regular tax | 30 percent included for AMT |
| Donation tax credit allowed against AMT | Generally the full credit | 80 percent |
| Most other non-refundable credits, including the basic personal amount | Generally allowed | 50 percent |
| Lifetime capital gains exemption in the AMT base | Different fraction | 30 percent of the exempt gain remains in the AMT base (the exemption is allowed at 70 percent) |
Table as of September 2026. The rate and the exemption threshold are tied to CRA's published brackets and to CRA's 2025 line 41700 instructions. The inclusion percentages are the post-2023 rules as summarized by CIBC Private Wealth in May 2026. Form T691 is the CRA form that applies them. The regular inclusion rate, which is still one-half, is the capital gains guide.
Why does a salary almost never trigger it?
Employment income is fully included under both calculations. Regular tax on a high salary uses brackets up to 33 percent. AMT uses 20.5 percent, and only above $181,440. The graduated tax is higher, so the minimum does not bite. The same is generally true of interest, rents, and other fully taxed income. AMT is a preference tax. If you have no preference, you are not the audience.
Regular tax includes half, so taxable income is $200,000. Federal tax on $200,000, after the basic personal amount phased down for income between $181,440 and $258,482, is $40,066.79. AMT includes the full $400,000, subtracts the $181,440 exemption, and taxes $218,560 at 20.5 percent, which is $44,804.80 before credits. Half of the maximum basic-personal-amount credit (half of $16,452 × 14 percent) is $1,151.64, leaving about $43,653 of minimum tax. The gap versus regular tax is about $3,586 of federal AMT. Provincial AMT is extra. This uses only the basic personal amount. CPP, carrying charges, and loss carryforwards change Form T691. It is an illustration, not a filing.
The sensitive cases are the ones where regular tax is unusually low relative to the economic gain. A qualifying small-business sale that uses the lifetime exemption can zero regular tax and still leave a minimum-tax bill, because only 70 percent of that gain is removed from the AMT base. A large in-kind gift of listed securities can do the same: regular tax uses a zero inclusion on the donated shares, while AMT includes 30 percent of that gain and allows only 80 percent of the donation credit. The gift is still often the better move. It is no longer free of minimum tax. The credit itself is the donation tax credit.
What else gets limited?
Since 2024, half of several deductions are disallowed in the AMT base. CIBC's May 2026 summary lists employment expenses other than those to earn commission income, moving expenses, child-care expenses, interest and carrying charges, investment-counsel fees, limited-partnership losses of other years, and non-capital loss carryovers. Capital-loss carryforwards are allowed at 50 percent, while current-year capital gains are included at 100 percent, so a loss carried forward does not fully shelter a current gain for AMT. The stock-option deduction that halves a qualifying benefit for regular tax is not available in the AMT base. Confirm each line on the current Form T691. A summary is not the form.
Eligible Canadian dividends are a special case. The gross-up and the dividend tax credit are both ignored for AMT, and the cash dividend is what enters the base. CIBC's worked comparison shows that eligible dividends alone, even in large amounts, still produce more regular tax than AMT under the post-2023 rules. Do not assume a dividend year is an AMT year. Run the form.
Can you get the minimum tax back?
AMT you pay can be carried forward for up to seven years and used against regular federal tax in a later year, to the extent regular tax exceeds minimum tax in that later year. It is a timing tax for many people, not a permanent extra tax. It is still cash in the year of the sale. If you realize a large gain and then have several low-income years, the carryforward can expire unused. That is the planning problem, not the rate table. The brackets you are comparing it with are the 2026 federal brackets, and the combined bill is what the income tax calculator estimates before AMT.
Realizing a capital gain over two calendar years can keep each year under the exemption, or can leave enough regular tax to absorb the minimum. That only helps if you were going to sell across the date anyway. A sale you delay for a tax reason you have not modelled is not a plan. The loss-harvesting calendar is a different tool and should not be mixed into a gain you actually want.
Frequently asked questions
Do I owe AMT if I only have a T4?
Almost certainly not. Fully taxed employment income produces more regular tax than the 20.5 percent minimum above $181,440. AMT shows up when a preference — a large capital gain, the lifetime exemption, a donation of securities, or a stack of limited deductions — pulls regular tax down. Complete Form T691 if you are anywhere near that description.
What is the 2026 basic exemption?
It is the start of the fourth federal tax bracket. CRA's 2026 bracket table puts that threshold at $181,440. CRA's 2025 line 41700 instructions used $177,882, which was the 2025 threshold. The exemption is for individuals. Trusts do not get it.
Does AMT replace provincial tax?
No. Provinces and territories generally levy their own minimum tax, often as a percentage of the federal amount. Quebec's calculation is separate. A federal-only illustration understates the cash you might owe in the year of a large gain.
I donated shares and paid no capital gains tax. Can I still owe AMT?
Yes. Since 2024, 30 percent of the capital gain on donated listed securities is included in the AMT base, and only 80 percent of the donation credit counts against minimum tax. The regular inclusion on that gift is still zero. The donation can remain the better tax result and still produce a minimum-tax cheque.
Is the minimum tax gone if I am under $181,440 of ordinary income?
The exemption is applied to adjusted taxable income, not to your salary line. A $400,000 capital gain is $400,000 in the AMT base even though only $200,000 is in regular taxable income. Look at the AMT base, then subtract $181,440.
How long can I carry AMT forward?
Up to seven years, against regular federal tax in a year when regular tax exceeds minimum tax. It is not a refund in the year you pay it. If later years stay light, the carryforward can expire. Track it. Your notice of assessment is the record.
Sources
- CRA: line 41700, minimum tax
- CRA: 2026 federal brackets, including the $181,440 threshold
- CRA: Form T691, Alternative Minimum Tax
- CIBC Private Wealth, May 2026: the AMT rules in force since 2024
Minimum tax is a form, not a vibe.
The preferences that trigger it are the same ones the rest of a return turns on. The 2026 tax guide is the filing companion, $49 CAD.
Get the 2026 Tax Guide — $49 CAD
