Changes to the Alternative Minimum Tax

The 2023 Federal Budget brought many welcome changes for the charitable sector, like an increase to the annual disbursement quota and proposed changes to which organizations can qualify for charitable donations.

However, another important proposed change for Benefaction donors and advisors to be aware of is changes to the alternative minimum tax (“AMT”). This change is targeted at high-net worth individuals who donate publicly listed securities.

For context, the federal AMT is an alternate tax to regular income tax that is computed without the use of many available deductions and credits to ensure that everyone is paying their “fair” share of tax.  Once calculated, AMT is paid if higher than regular income tax.

It is clear that Finance intends for AMT  to target high-income individuals that could take advantage of tax preferences to minimize their tax liability. It would typically apply in a taxation year when the taxpayer capitalizes on many commonly used tax incentives.  

The 2023 Federal Budget proposed changes to the AMT, which would take effect in 2024, that may cause high-net worth individuals to reconsider charitable giving plans. The government intends to add 30% of capital gains from donations of publicly listed securities to charities to the AMT calculations. In addition, they plan to reduce by 50% currently allowed non-refundable tax credits, like the charitable tax credit. Finally, the government proposes a raise to the AMT exemption level and the AMT tax rate.

For more details and an illustration of the proposed changes please check out this article from Miller Thomson: https://www.millerthomson.com/en/publications/communiques-and-updates/social-impact-newsletter/april-18-2023/budget-2023-changes-alternative-minimum-tax-donating-publicly-listed-securities/?utm_source=Vuture2023&utm_medium=email&utm_campaign=social-impact-2023-april-18.