Will Your Client Actually Recover Their AMT? A three-minute diagnostic for any client carrying forward alternative minimum tax
Three things decide it: what caused the AMT, whether the client has regular tax to absorb it, and whether any hard-case rules apply. Tick what fits and the outlook updates as you go.
One-off cause, regular income to absorb it.
The cause recurs. The profile has to change.
Hard-case rules or a near expiry.
How the checklist works
Tick what applies to a single client with an AMT carryforward. The outlook tells you whether recovery is likely on its own, which kind of planning to look at, and which hard-case rules apply. Nothing you tick is sent anywhere.
New to how the carryforward is recovered? Read how AMT recovery works first. It takes about 10 minutes.
Tick what applies to the client
The outlook updates as you tick.
What each outlook means
Likely
AMT looks like a one-off and the client has regular income. Recovery should start once the triggering event is past. Model next year to confirm.
Needs planning
The causes are likely to recur. Recovery depends on changing the income mix, splitting income or moving assets before it can begin.
At risk
Hard-case rules or a near expiry. Part of the carryforward may never be recovered without deliberate action this year.
Whatever the outlook, the test is the same
Useful plans bring AMT below regular tax, without simply raising regular tax, and without pushing AMT into the next year. The levers are covered in AMT recovery strategies.
Each outlook, including the at-risk cases, is modelled with numbers in AMT Recovery Mission.
Questions about AMT recovery risk
How do I know if a client will recover their AMT carryforward?
Compare expected regular federal tax with expected AMT for the coming years. If AMT is likely to stay at or above regular tax because the same causes recur, the carryforward will not be recovered without planning.
What makes AMT recur year after year?
Recurring capital gains, ongoing interest expense or investment counsel fees, tax shelter investing, and loss carryovers. If these are part of the client's normal profile rather than a one-off event, AMT will tend to recur.
When is AMT recovery hardest?
For trusts, which have no AMT exemption and often no regular income to absorb a carryforward; for individuals leaving Canada or non-residents with a single Canadian transaction; and when a carryforward is close to its seven-year expiry.
Is a 2026 capital loss carryback useful for AMT?
Capital losses realized in 2026 can be carried back to a gain year before the 2024 changes took effect, which can create a one-time opportunity to use losses without the adverse AMT treatment of later years.
You know the outlook. The plan is the harder part.
- Which recovery strategy fits this client’s profile, and what does it do to the numbers?
- How much of the carryforward can realistically come back before it expires?
- When does changing the income mix help, and when does it just raise regular tax?
- What actually works for a trust, a departure, or a move between provinces?
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