Federal and Provincial Alternative Minimum Tax  /  29

  Notes

(1) Generally, individuals will be subject to Alternative Minimum Tax (AMT) in a particular 

taxation year if their regular federal tax (net of certain personal credits), calculated in the 

usual way, is less than their “minimum amount”.  The “minimum amount” is calculated as 

follows: 

[(adjusted taxable income – $40,000) × lowest federal tax rate of 15%] 

less certain federal personal credits 

If the minimum amount is greater than regular federal tax, that amount becomes the 

individual’s federal tax liability for the year.

(2) An individual’s adjusted taxable income is calculated based on regular taxable income, 

which is then adjusted for certain tax preference items.

(3) The 2013 federal budget proposed to reduce the gross-up on non-eligible dividends to 18% 

(from 25%).  This change is effective for dividends paid after 2013. 

(4) When AMT is applicable, the difference between the “minimum amount” and the 

individual’s regular federal tax liability may be carried forward seven years and claimed as 

a credit in any of those years when AMT no longer applies. However, AMT carry-forward 

balances cannot be used to reduce tax on split income.

(5) In general, provincial AMT (with the exception of Québec) is calculated by applying the 

applicable provincial AMT rate to the amount by which the federal “minimum amount” 

exceeds regular federal tax. This balance is then added to regular provincial tax in 

determining the provincial tax liability for the year.

(6) The Québec Minimum Tax (QMT) system generally mirrors the federal system but with a 

number of differences, including:

• An add-back for capital gains of 25% rather than 30%—effectively 75% of capital gains 

are included in income for QMT purposes

• No add-back for stock option deductions claimed.

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Current as of May 3, 2013