{"id":685,"date":"2023-05-18T22:52:28","date_gmt":"2023-05-18T22:52:28","guid":{"rendered":"https:\/\/advisor.wellington-altus.ca\/lakeview-wealth-management-2\/?p=685"},"modified":"2023-06-02T22:55:28","modified_gmt":"2023-06-02T22:55:28","slug":"alternative-minimum-tax-when-does-it-apply-how-and-for-whom","status":"publish","type":"post","link":"https:\/\/advisor.wellington-altus.ca\/lakeview-wealth-management\/2023\/05\/18\/alternative-minimum-tax-when-does-it-apply-how-and-for-whom\/","title":{"rendered":"Alternative Minimum Tax \u2013 When Does It Apply, How, And For Whom?"},"content":{"rendered":"
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Download this article as a PDF.<\/a><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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BACKGROUND<\/b><\/p>\n

The Alternative Minimum Tax (AMT)1<\/sup>\u00a0is a second, alternate tax liability calculation that Canadian individuals and trusts must consider annually in parallel with their normal tax liability. First introduced in 1986, AMT was implemented to promote and maintain fairness within Canada\u2019s income tax regime.<\/p>\n

Simply, if a taxpayer\u2019s AMT liability exceeds their normal tax liability otherwise calculated, the AMT represents their federal tax liability for the year. There are a few exceptions to AMT, such as in the year of death or bankruptcy for individuals, or for certain types of trusts including alter ego or joint spousal, mutual fund, or employee life and health trusts.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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[1] This communication addresses Federal AMT only, not provincial or territorial AMT.<\/p>\n

How does it work?<\/strong><\/p>\n

The AMT was designed to ensure that high income earning Canadians do not disproportionately reduce their tax liability by applying various tax advantages, such as reporting considerable exempt income or claiming significant tax deductions or credits. Most taxpayers are unaware of AMT\u2019s existence as they don\u2019t trigger its application. Rather, their normal tax liability calculated exceeds AMT thresholds.<\/p>\n

AMT is calculated on\u00a0Form T691 Alternative Minimum<\/strong>\u00a0Tax for individuals, or\u00a0T3, Schedule 12 Minimum Tax<\/strong>\u00a0for trusts, by:<\/p>\n