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🇨🇦 Federal AMT • 2026 Rate, Exemption & T691

Canada Alternative Minimum Tax (AMT) 2026 Rules Guide

Understand the federal AMT system for individuals and applicable trusts, including the 20.5% rate, $181,440 2026 basic exemption for eligible individuals, preference-item adjustments, capital gains treatment, AMT credits, and Form T691.

1. What is Canada's Alternative Minimum Tax (AMT)?

The Alternative Minimum Tax is a parallel federal income-tax calculation intended to limit the benefit of certain deductions, exemptions, and tax credits. An individual generally calculates tax under both the ordinary rules and the AMT rules and pays the higher resulting amount. The AMT calculation starts from income determined under the regular system and makes specified adjustments to create adjusted taxable income for minimum-tax purposes. It is therefore not a simple second tax bracket applied to gross income.

Key Framework Highlights:
  • The federal AMT rate is 20.5% for the AMT calculation.
  • For 2026, the AMT basic exemption for an eligible individual is $181,440, indexed through the federal tax-bracket system.
  • AMT can arise from preference items such as capital gains and certain deductions even when an individual's ordinary taxable income does not look unusually high.
  • Certain trusts are subject to minimum tax, while specified trusts are exempt under the rules; graduated rate estates are among the trusts exempt from minimum tax.
  • Provincial or territorial minimum-tax consequences can apply separately from the federal AMT calculation.
Action Checklist:
  • Identify capital gains, security-option deductions, losses, credits and other amounts that may require AMT adjustments.
  • Calculate adjusted taxable income and the federal minimum-tax amount using the year-specific T691 rules.
  • Compare the federal minimum-tax result with regular federal tax and account for any applicable provincial or territorial minimum-tax amount.

2. 2026 AMT Rate, Exemption and What Changed

The federal AMT reform that applies to taxation years beginning after 2023 increased the AMT rate from 15% to 20.5% and replaced the former $40,000 exemption with an exemption linked to the start of the fourth federal income-tax bracket. For 2026, that indexed amount is $181,440. The reform also broadened the AMT base by limiting or eliminating the benefit of numerous deductions and credits for minimum-tax purposes.

Rule2026 / Current treatmentImportant qualification
Federal AMT rate20.5%This is the federal AMT calculation rate, not a replacement for the regular progressive federal rates.
Basic AMT exemption$181,440Available to eligible individuals; trust rules and exemptions must be considered separately.
Regular federal personal rates14% to 33%The 2026 regular federal system remains progressive; AMT is a parallel calculation.
Capital gains for AMTGenerally 100% of most capital gainsAMT treatment is separate from the ordinary capital-gains inclusion rule and has specific exceptions/adjustments.
Charitable donation tax credit80% allowed for AMT purposesThis is more favourable than the originally proposed 50% AMT treatment.
Many other non-refundable creditsGenerally only 50% allowedThe exact treatment depends on the credit and the T691 rules.
AMT paidMay generate a carryforward creditGenerally usable against regular tax in the following 7 taxation years, subject to the statutory conditions.

3. Capital Gains: Regular Tax vs AMT in 2026

A major source of confusion is the difference between the ordinary capital-gains rules and the AMT rules. The federal government decided not to proceed with the previously proposed increase in the regular capital-gains inclusion rate. For 2026, the ordinary capital-gains system therefore retains the one-half inclusion rate under the currently enacted rules. That does not remove the separate AMT adjustment: for AMT purposes, most capital gains are generally included at 100%, with specific statutory adjustments and exceptions. Consequently, a taxpayer can have a much larger adjusted taxable income for AMT than for ordinary tax.

Key Framework Highlights:
  • Do not describe the 2026 regular capital-gains system as 50% below $250,000 and 66.67% above $250,000; the previously proposed increase was cancelled.
  • For AMT, the legislation generally includes taxable capital gains, allowable capital losses and certain related amounts at a 100% rate rather than the regular 50% inclusion rate.
  • Some special categories receive different AMT treatment. For example, capital gains on qualifying gifts of publicly listed securities have specific AMT rules rather than a blanket 100% result.
  • The lifetime capital gains exemption and donated-security rules can also produce special AMT deductions, so the AMT result cannot safely be estimated by simply multiplying every gross capital gain by 20.5%.

4. How the Federal AMT Calculation Works

The federal AMT calculation is more involved than 'income minus $181,440 multiplied by 20.5%'. The statutory framework first determines adjusted taxable income using AMT-specific inclusions and restrictions. The AMT formula then applies the 20.5% rate to the amount above the applicable exemption and subtracts the basic minimum tax credit and other permitted amounts under the AMT rules. The resulting federal minimum-tax amount is then compared with regular federal tax to determine whether additional federal AMT is payable.

Action Checklist:
  • Start with the amounts required by the ordinary income-tax calculation.
  • Add or otherwise adjust AMT preference items, including the applicable treatment of capital gains, certain losses, deductions and tax credits.
  • Apply AMT-specific limits, including the applicable treatment of employment expenses, interest and financing expenses, child-care expenses, moving expenses, certain loss carryovers and other deductions.
  • Apply the 2026 basic AMT exemption of $181,440 where eligible.
  • Apply the 20.5% federal AMT rate and the applicable basic minimum tax credit and other permitted adjustments.
  • Compare the federal minimum-tax result with regular federal tax; if the AMT calculation is higher, the excess is generally the additional federal AMT.
  • Check Form 428 or Form T2203, where applicable, for provincial or territorial minimum-tax consequences; Quebec uses its own provincial process.

5. Common AMT Triggering Items, Deductions and Credits

CRA identifies numerous situations that can require an AMT calculation. The presence of one item does not automatically mean AMT is payable, but it is a signal that the T691 calculation may be required. Common examples include taxable capital gains, certain rental or limited-partnership losses, child-care expenses, moving expenses, office and employment expenses, certain carrying charges and interest, security-option deductions, capital-gains deductions, and certain federal tax credits.

ItemWhy it matters for AMT
Taxable capital gainsCapital gains are generally included more heavily for AMT purposes than under the regular tax calculation.
Capital-gains deduction / LCGEThe AMT calculation applies its own deduction rules; the regular deduction should not simply be reused unchanged.
Security-option deductionsThe regular security-option deduction is treated differently for AMT and may be unavailable in its ordinary form.
Child-care and moving expensesSpecified deductions are restricted for AMT purposes.
Office/employment expensesCertain amounts are only partly deductible for AMT purposes.
Interest and financing expensesCertain property-related interest and financing deductions are restricted for AMT.
Loss carryovers and limited-partnership lossesSpecific AMT adjustments can reduce the benefit available under the regular calculation.
Federal dividend tax credit and certain other creditsCertain credits are restricted or disallowed for AMT purposes.
Charitable donations80% of the charitable donation tax credit is generally allowed for AMT purposes, subject to the detailed rules.

6. AMT Carryforward: How You Can Recover AMT Paid

AMT is often a timing difference rather than a permanent additional tax when the taxpayer subsequently has enough regular tax to use the AMT credit. Where the statutory conditions are met, AMT paid can generally be carried forward for up to seven subsequent taxation years. The credit is not an automatic refund: it is generally usable when regular tax for a later year exceeds the amount payable under the AMT calculation for that later year, subject to the detailed carryforward rules.

Key Framework Highlights:
  • The carryforward is generally available for the next seven taxation years after the year in which AMT was paid.
  • Using the carryforward requires the appropriate T691 calculation for the later year.
  • The credit is limited by the amount available under the carryforward rules; unused amounts can expire after the applicable period.
  • Provincial or territorial minimum-tax credits are calculated separately where applicable.
  • A taxpayer should retain the T691 and supporting records so the historical AMT balance can be substantiated.

7. Form T691 and CRA Filing Process

Form T691 is the CRA form used to calculate federal tax payable under the Alternative Minimum Tax system. CRA currently publishes a year-specific T691 and states that it is used to calculate federal AMT. For a 2026 tax-year return, taxpayers should use the applicable 2026 version once CRA releases it rather than carrying forward a prior-year form without checking for changes.

Action Checklist:
  • Complete the regular T1 income-tax calculation first.
  • Identify the AMT preference items and credits that apply to the taxpayer.
  • Complete the applicable year-specific Form T691.
  • Enter the federal AMT result on the appropriate return line when required.
  • For electronic filing, retain the T691 and supporting records; for a paper return, attach T691 when the CRA instructions require it.
  • Check provincial or territorial minimum-tax requirements separately, including Form 428 or T2203 where applicable and Quebec's separate provincial process.

8. Who Can Be Subject to AMT?

Federal AMT primarily applies to individuals and certain trusts, not to ordinary corporations as a separate individual AMT payer. High income alone is not the sole test. The AMT is designed to address situations where deductions, exemptions, credits or capital gains substantially reduce regular tax relative to the AMT calculation. Certain trusts are exempt from minimum tax under specific statutory rules, and graduated rate estates are among the exempt trusts.

Key Framework Highlights:
  • An individual with ordinary employment income and no significant AMT preference items may not owe AMT simply because income is high.
  • An individual with significant capital gains, a large capital-gains deduction, certain option deductions, or other preference items may face AMT even where the regular tax calculation is substantially different.
  • Certain trusts are subject to the minimum-tax regime, while specified trusts are exempt under the legislation.
  • The 2026 $181,440 exemption should not be applied mechanically to every trust; eligibility for the exemption depends on the trust rules.

9. 2026 AMT Planning Checklist

AMT planning is especially important before transactions that create large capital gains or rely on deductions and credits that the AMT calculation restricts. A regular-tax-only estimate can materially understate the cash tax payable in the transaction year.

Action Checklist:
  • Model regular tax and AMT together before a large capital-gain disposition.
  • Review whether the transaction involves the lifetime capital gains exemption, donated securities or employee security options.
  • Quantify restricted deductions and credits instead of assuming the regular-tax amounts are fully available for AMT.
  • Estimate any provincial or territorial minimum-tax amount in addition to federal AMT where applicable.
  • Track prior-year AMT paid and the remaining seven-year credit window.
  • Keep the year-specific T691, return calculations, transaction documents and supporting schedules for future carryforward claims.

Frequently Asked Questions

For 2026, the federal AMT basic exemption for an eligible individual is $181,440. The amount is linked to the start of the fourth federal personal income-tax bracket and is indexed through the federal bracket system. Trusts have separate rules and should not automatically be given the individual exemption.

Yes. The federal AMT calculation uses a 20.5% rate. That is a parallel minimum-tax rate and does not replace the regular progressive federal personal income-tax rates.

Generally, most capital gains are included at 100% when adjusted taxable income is calculated for AMT purposes. This is separate from the ordinary capital-gains system, which retained the one-half inclusion rate after the government decided not to proceed with the previously proposed increase in the regular inclusion rate.

The $181,440 figure is the basic exemption used in the AMT calculation for eligible individuals, not a blanket income test. Whether AMT is payable depends on adjusted taxable income, preference items, credits and the comparison with regular tax. The CRA's triggering guidance specifically identifies items such as taxable capital gains, certain deductions and certain credits.

AMT paid can generally generate a credit that is available for up to the following seven taxation years, subject to the detailed statutory conditions. The credit is generally used when the later year's regular tax exceeds the amount payable under the AMT calculation, so it is not an automatic cash refund.

The CRA's filing instructions distinguish between electronic and paper filing. When filing electronically, the taxpayer generally keeps Form T691 for their records; when filing a paper return, the CRA instructs taxpayers to attach Form T691 where required. Form T691 is the federal calculation form, and provincial or territorial minimum-tax forms may be required separately.

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AMT Key Metrics — 2026

  • Federal AMT Rate
    20.5% on the amount above the AMT exemption
  • 2026 Basic Exemption
    $181,440 for eligible individuals
  • Capital Gains for AMT
    Generally 100% of most capital gains are included in AMT income
  • Federal AMT Form
    Form T691 — Alternative Minimum Tax
  • AMT Credit Window
    Generally the next 7 taxation years

Related Tax Tools

Canada Capital Gains Tax Guide→Corporate Income Tax Rates & SBD Guide→Sole Proprietorship Tax Guide→

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