Over the past couple months, we've been hearing from more and more of our clients that their tax bill was higher due to an unexpected 'alternative minimum tax' ("AMT"). Although the AMT has been around since 1986, there were significant changes that came into effect for the 2024 tax year.

Our tax system has two different ways to figure out how much you owe: the "regular" way and the "backup" way. The AMT is like that backup way, designed to make sure that even if you have a lot of special deductions or tax breaks that reduce your regular tax, you still pay a baseline minimum amount of tax. Income tax software calculates both taxes and you end up paying whichever amount is higher.

The AMT Exemption, Tax Rate, and Carry Forward

The AMT exemption has been increased to $177,882 for 2025 (indexed annually). Therefore, if the AMT calculation determines income to be below this threshold, you'll only need to focus on regular income taxes.

- The baseline AMT tax rate is a flat 20.5% (previously 15%)

- If you're subject to additional AMT tax in one year, you'll be able to use it to offset regular income taxes in future years (can be carried forward up to 7 years).

Scenarios when AMT could be higher than regular tax:

- Earning significant capital gains (e.g., more than $335,000) or offsetting those significant gains with prior year capital losses.

- When claiming favourable tax deductions that offset income such as the Lifetime Capital Gains Exemption, the employee stock option deduction, charitable donations, or a flow through share deduction.

Situations where AMT is not impacted:

- When claiming the principal residence exemption.

- Earning dividends from Canadian publicly listed companies.

The tax landscape continues to become more complex, and we work with your tax professionals to ensure that we are not only being mindful of how to navigate these changes but also optimizing the opportunities available.

Another summer has flown by, and the Batten household found itself taken over by Caleb's (8) baseball schedule. Up until the third week of July, you would have found us on a baseball diamond every single day of the week, from practice to games to tournaments. We had no idea the commitment we agreed to when he was asked to join the All-Star team. To make it even more 'fun', we also put him in weekly 4 on 4 hockey and piano practices. Thankfully, Brielle (5) only had baseball twice a week, swimming, and piano. You'd think the worst of it was travelling from diamond/rink/pool, but it wasn't. Evelyn (2½), not to be forgotten, continues her reign of terror. Daily demands consist of yogurt drinks, jellybeans, and to watch Baby Shark… or else! Who would have thought that dealing with market volatility is the calmest part of my day!

Dugan