Alternative Minimum Tax (AMT) Rules
The 2024 AMT overhaul has introduced a new layer of complexity for clients who have never had an AMT problem before — and many are only finding out at tax filing time. Custom-written for CPAs and tax advisors.
Hugh Woolley
The revised AMT rules are generating significant, and in many cases unexpected, tax bills for clients with capital gains, borrowed investment portfolios, and large charitable donations – taxpayers who have no connection to aggressive tax shelters. This course gives you a thorough working knowledge of the current AMT calculation, the client profiles most vulnerable to AMT, and the planning strategies you can use right now to minimize, avoid, or recover AMT.
Many clients encountered AMT for the first time in 2024 and were shocked. They ask: "I'm just a regular taxpayer. I haven't done anything wrong. How am I subject to this?"
The 2024 AMT changes dramatically expanded who gets caught. This session shows you exactly which client profiles are now AMT-sensitive and walks you through the planning strategies that actually work. You'll see how AMT can add 5% to 6% to the effective tax rate on capital gains, turning what should be a 26.5% rate into 32%. More importantly, you'll learn how to minimize this impact and recover AMT that's already been paid.
The session focuses on the changes that matter, including:
- 100% capital gains inclusion for AMT versus 50% for regular tax
- The brutal asymmetry where capital losses only offset gains at 50%
- Interest expense limited to 50% deduction when earning property income
- Stock option deductions that provide no AMT relief
- Donation credits cut from 33% relief down to 26.4% effective rate
We cut through the noise of trivial adjustments and zero in on what creates real AMT exposure. You'll see why realizing capital gains and losses in the same year matters so much now, when interest expense deductions can be preserved by restructuring rental activities, and how to time large donations to avoid turning a charitable gesture into an AMT nightmare.
Every concept is illustrated with detailed examples from actual practice. You'll see the numbers, understand the planning alternatives, and leave with strategies you can apply to your files right away. When you recover AMT for a client and get them a refund they weren't expecting, they will be very happy. This session shows you how to make that happen.
This program will help you understand the AMT rules, spot issues in client situations, and identify valuable planning opportunities. Learn at your own pace with instant access.
Alternative Minimum Tax (AMT) Rules
Seminar Snapshot
Course Syllabus
The AMT Framework
Understand the structure and policy context of the revised AMT rules before working through the technical detail
Background and Policy Context
- The 2024 AMT changes as part of a broader tax base broadening agenda
- How AMT targets wealthy individuals rather than aggressive tax shelter users
- Why clients who have never paid AMT before are now being caught
- The distinction between AMT payable and AMT carryover recovery
- Setting expectations for which clients will be affected
The AMT Calculation: Core Formula
- The basic formula: (AMT base minus exemption) multiplied by rate, minus adjusted credits
- AMT as a separate parallel tax calculation compared to regular tax
- When the excess of AMT over regular tax becomes payable
- How the AMT carryover arises and the conditions for recovery
- Why the same profile that generates AMT also makes recovery difficult
The AMT Base: What Has Changed
- Capital gains included at 100 percent versus 80 percent under the old rules
- Only 50 percent of certain expenses and carryovers allowed as deductions
- The result: AMT taxable income can be significantly higher than regular taxable income
- Distinguishing material changes from trivial ones in practice
- Identifying which adjustments will actually affect your client files
The AMT Exemption and Rate
- The exemption increased from $40,000 to $177,882 for 2025, indexed going forward
- How the exemption effectively targets higher net worth individuals
- The AMT rate increased federally from 15 percent to 20.5 percent
- The narrowed gap between AMT and regular tax: more clients caught, harder to recover
- The relationship between the exemption amount and the federal tax brackets
AMT Base Inclusions and Deductions in Detail
Work through each adjustment category, separating the ones that matter from those that do not
Capital Gains: The Most Significant Change
- 100 percent inclusion of capital gains in the AMT base
- Capital gains where the capital gains exemption is claimed: 30 percent inclusion
- Public company share donations: 30 percent of the gain included in AMT base
- The asymmetry problem: 100 percent inclusion of gains versus 50 percent deduction for net capital loss carryovers
- Why this asymmetry is particularly punishing for clients with loss carryforwards
Loss Carryovers: A Compounding Problem
- Net capital loss carryover: only the actual claim allowed, effectively 50 percent of the loss applied
- Non-capital loss carryover: 50 percent of the amount claimed for regular tax
- The double haircut for allowable business investment losses that become part of a non-capital loss: effectively 25 percent allowed for AMT
- Why realizing gains and losses in the same year is now critical planning
- Modeling the income required to offset AMT from a capital loss carryover scenario
Stock Options, Interest Expense, and Other Adjustments
- Stock option deduction: nil for AMT versus 50 percent for regular tax
- Interest and financing expenses to earn property income: only 50 percent allowed for AMT
- The question of whether rental income constitutes property income or business income
- Limited partnership losses, Northern residents deduction, and other deductions at 50 percent
- The trivial adjustments: employee expenses, CPP, moving expenses, childcare -- why these rarely affect the outcome
AMT Tax Credits
- Personal tax credits reduced to 50 percent for AMT
- Donation credit: 80 percent allowed for AMT versus 100 percent for regular tax
- The effective donation relief rate drops from 33 percent federally to 26.4 percent for AMT
- The foreign tax credit: a special calculation, but generally not a standalone AMT trigger
- Why the donation credit reduction matters most in large donation planning
Rates, Provincial AMT, and the Rate Comparison
Understand what AMT actually costs across Canada and which types of income help or hurt
Federal AMT Rates and the Capital Gains Impact
- Working through a $10 million capital gain: regular tax at 16.5 percent, AMT at 20.5 percent
- The 4 percent federal AMT differential and what it means in dollar terms
- How the AMT effectively raises the capital gains inclusion rate from 50 to 64 percent in Ontario
- The combined effective tax rate on capital gains subject to AMT: over 32 percent in Ontario
- AMT as a stealth increase in the capital gains inclusion rate for high net worth individuals
Provincial AMT: The Add-On Calculations
- How provincial AMT piggybacks on the federal calculation as a percentage of federal AMT
- Quebec's separate AMT calculation and how it differs
- Provincial add-on rates across Canada: Alberta at 35 percent, Ontario at 38.42 percent, Nova Scotia and PEI at 57.5 percent
- Effective tax rate on capital gains by province when AMT applies
- The combined additional tax burden: typically 5 to 6 percent on top of regular tax outside Quebec
Regular Tax vs. AMT Rate Comparisons
- The differential on ordinary income, eligible and non-eligible dividends, capital gains, and stock options
- Why ordinary income is the most effective at offsetting AMT
- Why eligible dividends are the least effective income type for AMT recovery
- The rate differential on deductions: interest expense, capital loss carryovers, and donations
- Using the rate comparison chart to identify both AMT-sensitive profiles and recovery strategies
Pending Legislative Changes
- The proposed carve-out for capital gains arising from flow-through shares
- The proposed 50 percent limitation on investment counsel fees
- Why these proposals were not included in 2024 tax software
- The uncertainty around retroactive application
- How to advise clients while the status of these changes remains unresolved
Tax Profiles Sensitive to AMT
Recognize which clients are at risk and why certain combinations of income and deductions are particularly dangerous
Large Capital Gains: The Primary Trigger
- Dispositions of real estate and the interaction with recapture
- Sale of operating company shares by an individual
- Sales of public company stock portfolios
- Capital gains realized and retained inside an inter-vivos trust
- Deemed disposition on emigration from Canada
- Why the deemed disposition on death is exempt from AMT
Interest Expense and Prescribed Rate Loans
- Borrowed funds used to purchase investments: the 50 percent limitation
- Prescribed rate loan arrangements and their AMT sensitivity
- Margin accounts and portfolio lending: calculating the exposure
- When the interest deduction creates an AMT liability even with no capital gains
- The compounding effect when interest expense and capital gains appear together
Trusts: A Particularly Vulnerable Structure
- Inter-vivos trusts have no AMT exemption
- Capital gains retained in a trust: fully included in the AMT base
- Trusts with interest expense from prescribed rate loans or margin borrowing
- Why the trust structure that once made sense for income splitting may now generate unexpected AMT
- The planning questions that trust advisors need to be asking now for 2025
Stock Options, Donations, and Loss Carryovers
- Public company stock option benefits with the 50 percent deduction: no deduction allowed for AMT
- The common problem: large stock option exercise with insufficient other income in the same year
- Large donations of public company stock: the 30 percent gain inclusion in the AMT base
- Net capital and non-capital loss carryforwards applied against current year gains
- Situations where a client owes AMT despite having zero taxable income for regular purposes
AMT Planning Strategies
Work through the strategies available to minimize, avoid, and recover AMT using detailed numerical examples
Managing Income and Timing Gains and Losses
- Why ordinary income, salary, and business income are the most effective buffers against AMT
- Calculating how much higher-taxed income is needed to eliminate AMT on a given capital gain
- Realizing capital gains and capital losses in the same year to avoid net capital loss carryover problems
- Spreading a capital gain using the instalment sale and vendor take-back mortgage approach
- David's example: $1.5 million gain versus $10 million gain -- comparing AMT, recovery timelines, and planning options
Reducing Interest and Financing Expenses
- Paying down borrowed investment loans to eliminate or reduce the 50 percent disallowance
- Partially reducing the loan and partially surrendering the deduction
- Whether rental income can be repositioned as business income to remove the interest restriction
- Kathy's example: multiple rental properties and the steps to support a business income characterization
- Transferring an investment portfolio to a corporation and the tax costs involved
Using Corporations to Avoid AMT
- Corporations are not subject to the individual AMT rules
- Rolling shares into a holding company before sale: the tax-free rollover strategy
- Jeff's example: $40 million business sale -- comparing personal, holdco, and combination approaches
- The capital dividend account as a tax-free extraction tool after a corporate capital gain
- Non-eligible dividends as an AMT soaker: using the higher dividend tax rate to shelter capital gain AMT
Managing Donations and the Donation Credit
- Spacing large public company share donations across multiple years to stay below the AMT threshold
- Elaine's example: $2 million donation generating AMT versus $300,000 per year eliminating it
- Donating in the year of death or by will through the estate to avoid AMT entirely
- Why the donation credit limitation makes large lump-sum donations particularly problematic under the new rules
- Coordinating donation timing with other AMT-sensitive income in the same year
Recovery Strategies: Getting AMT Back
- The seven-year carryforward period and the conditions for recovery
- Why the income type matters enormously for recovery effectiveness
- Interest income versus eligible dividends: comparing recovery rates and timelines
- Why the same profile that created the AMT will prevent recovery if nothing changes
- Switching from dividends to salary for owner-managers: a fundamental planning shift
Special Cases, Exemptions, and Practice Management
Address the situations that fall outside the main planning framework, including death, trusts, and year-of-death strategies
Exemptions from AMT: Year of Death and GRE
- No AMT applies on the terminal T1 return
- The rights and things return is also exempt
- Alter ego, spousal, and joint spousal trusts: no AMT on the deemed disposition in the year of death
- Graduated rate estates do not pay AMT for the first 36 months
- Selling shares or assets in the GRE as an alternative to the spousal rollover
Spousal Rollover Planning on Death
- The default spousal rollover and the AMT it creates when the surviving spouse later sells
- John and Joan example: $10 million accrued gain and the AMT consequence of rolling over versus not
- Electing out of the spousal rollover to realize the gain on death with no AMT
- Selling inside the GRE within 36 months as a third alternative
- How to model the trade-off between accelerated tax payment and AMT elimination
Trusts: Specific Planning Approaches
- Distributing portfolio investments to beneficiaries to dissolve the trust's AMT exposure
- Transferring investments to a holding company: solving AMT but walking into TOSI and flip property rules
- Not claiming the interest deduction in the trust: when it makes sense and what it costs beneficiaries
- Paying off the loan or reducing it to remove the 50 percent interest restriction
- Combination approaches and why 2025 is the year to act on trust AMT planning
Avoiding Bad Combinations and Practice Management
- The combinations that compound AMT: capital gains plus loss carryovers in the same year
- Flight's example: an ABIL that becomes a non-capital loss carryover and the double 50 percent restriction
- Why RRSP withdrawals might make sense to create income and use up the ABIL in the year it arises
- Reviewing 2024 returns proactively: clients who paid AMT for the first time are your starting point
- Building an AMT review into your annual client planning process going forward
Meet Your Presenters
Michael Cadesky
Michael Cadesky is the managing partner at Cadesky Tax and a committed contributor to the tax and accounting professions since 1980, earning the title of Fellow from CPA Ontario. He is a past governor of the Canadian Tax Foundation, past chair of STEP Canada and STEP Worldwide, and past chair of the CPA Canada Tax Committee for Small and Medium-Sized Enterprises. Michael is also the co-author of 11 books on tax subjects and the author or co-author of numerous papers and articles on Canadian and international taxation.
Hugh Woolley
Hugh Woolley is an independent tax consultant who has taught income tax for over 30 years for many professional organizations. Hugh has written courses for CPA Canada and over 10 papers for the Canadian Tax Foundation and STEP Canada. From 1990–1992 he worked at the CRA's Rulings Directorate in Ottawa writing "butterfly" tax rulings. Hugh is a past Governor of the Canadian Tax Foundation.
FAQ
When can I access the course?
Immediately upon purchase. All course materials are available on-demand, allowing you to start learning right away.
How long do I have access?
You have 1-year all-access to the course materials. Watch and review the content as many times as you need, at your own pace.
Does the course provide CPD?
Yes. Upon completion, you will receive a verifiable CPD certificate indicating all instructional learning hours and required details.
What's included in the course?
Full video recording of the seminar, plus slides with detailed notes for your reference. Additional resources may be included.
Can I watch on any device?
Yes. Access the course from your computer, tablet, or phone — any device with internet access.