Updated Checked by the Tax-Services.ca editorial team How we check
The alternative minimum tax in Canada is a second tax calculation that runs beside your normal one. It takes 20.5% of your adjusted income above an exemption, which the CRA puts at $177,882 for 2025 ($181,440 for 2026), and you pay whichever result is higher. Most people never see it. If you sold a big asset or claimed large deductions in a high-income year, you might.
What is the alternative minimum tax in Canada?
Think of it as a floor. Your regular return uses your normal deductions and credits. The AMT return throws out part of them and counts more of your income, so a person with lots of tax breaks can’t drop to a tiny bill. If the AMT figure is higher than your regular federal tax, you pay the extra.
You report it on Form T691 and enter the result on line 41700 of your return. The CRA’s line 41700 page says you may need it if your total income goes above the exemption amount and you had taxable capital gains, certain losses from rental property or tax shelters, or claims like union dues, child care and moving expenses. Some provinces have their own AMT, which is a separate form.
How did the rules change in 2024?
Finance Canada reformed the tax for years starting on or after 1 January 2024. The rate rose from 15% to 20.5%, and the exemption jumped from $40,000 to $173,205 for 2024. That number is indexed to inflation, which is how it reached $177,882 for 2025. For 2026 the exemption is $181,440, the start of the fourth federal bracket. Check the latest T691 before you rely on a number.
| Feature | Regular tax | Alternative minimum tax |
|---|---|---|
| Rate | Brackets from 14% to 33% | 20.5% flat |
| Exemption | Basic personal amount | $173,205 (2024), $177,882 (2025), $181,440 (2026) |
| Capital gains counted | 50% | 100% of most gains |
| Most credits and deductions | Fully allowed | 50% allowed |
| Charitable donation credit | Fully allowed | 80% allowed |
| Carry forward of extra tax paid | Not applicable | Up to 7 years |
The 50% inclusion on regular capital gains is the current general rule. The plan to raise it to two-thirds was cancelled by the Prime Minister’s announcement of 21 March 2025.
Does the minimum tax apply to you?
Probably not if your income sits below the exemption. The CRA points to $177,882 of income for 2025 ($181,440 for 2026) as the place to start looking. Above that, three things push you into it: a large capital gain, a big donation or a tax shelter loss.
A rough picture for 2025. Say you earn $100,000 and sell a property for a $200,000 gain. Regular tax counts $100,000 of that gain, so taxable income is $200,000. The AMT counts all $200,000, so its base is $300,000. Take off the $177,882 exemption and you have $122,118. At 20.5% that’s about $25,034 before credits. Your regular federal tax on $200,000 of taxable income is worth comparing with that, and the capital gains tax calculator shows the regular side. The AMT arithmetic is ours and leaves out credits, so the real T691 figure will be lower.
And a donation deserves a mention. A large donation cuts your regular tax, yet the AMT allows only 80% of the credit, so check it before you give.
Does a salary alone ever trigger it?
Rarely. Take Marcus, who earns a steady $190,000 in Calgary and has no gains, no shelters and no big claims. His income is over the line, but the AMT only bites when the adjusted base is much larger than his regular taxable income, and with plain salary the two are close. The regular tax is almost always the higher one. It’s the lumpy years that matter: a business sale, a cottage that isn’t your principal residence, a block of shares cashed in at once.
Once your income goes above the exemption, the CRA still wants you to do the test. If you use tax software, it usually runs T691 for you and tells you if a number lands on line 41700. If you file by hand, the form is short enough to check in an evening.
What if you pay AMT this year?
It isn’t money lost. The extra you pay becomes a credit against your regular tax in later years, up to seven of them. You only get it back if your regular tax rises above the AMT in one of those years, so in a one-off high income year the credit may take time to use.
If you expect a large gain, plan before you sell. Spreading gains over two years, timing a donation or checking your rental losses can all change the result. For everyday levels of income, use the income tax calculator and the tax credits calculator for the regular side. Dividends also feed into the calculation, so see the dividend tax calculator too.
Mistakes and limits
People confuse the AMT with the higher top bracket. It’s a separate test, not the 33% rate. Another slip is treating the 100% capital gains figure as the rate on the gain. The gain is counted fully in the AMT base, then the 20.5% applies to the total above the exemption.
Our numbers are an outline. The real form has adjustments for many items and some gains are treated differently. If your income is over the exemption ($177,882 for 2025, $181,440 for 2026) and you had a major sale, get the T691 done properly or ask a tax preparer to run it.
Where the numbers come from
The $177,882 threshold comes from the CRA page for line 41700, minimum tax, for the 2025 return, which we opened to confirm. The 2026 exemption of $181,440 is the start of the fourth federal bracket for 2026, so confirm it on the CRA page. The 20.5% rate, the 100% gains inclusion, the 50% and 80% credit shares, the $173,205 figure for 2024 and the seven year carryforward come from Finance Canada’s explanation of the 2024 reform. The 2025 rule on capital gains inclusion comes from the Prime Minister’s release of 21 March 2025. Nothing here is advice for your own return, and this site isn’t tied to the CRA or any government.
Frequently asked questions
What is the AMT rate in Canada?
It's 20.5% on adjusted income above the exemption, for tax years starting on or after 1 January 2024.
What is the AMT exemption amount?
The CRA shows $177,882 for 2025. The 2024 amount was $173,205. We couldn't find the 2026 figure yet.
Does AMT apply to capital gains?
Yes. For AMT purposes 100% of most capital gains count as income, against 50% in your regular calculation.
Can I get the AMT back?
You can credit it against your regular tax in later years, for up to 7 years, as long as your regular tax rises above the AMT in one of them.
Which form do I use?
Form T691, Alternative Minimum Tax. The result goes on line 41700 of your return.
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill