Alternative Minimum Tax (AMT) For High-Income Individuals

Insights into the upcoming changes

Significant changes were announced to the Alternative Minimum Tax (AMT) system in the federal budget for 2023. The Alternative Minimum Tax (AMT) is a parallel tax calculation for individuals that allows for fewer deductions, exemptions, and tax credits than regular income tax rules.

ATM Framework

By limiting access to certain exemptions and deductions, the AMT regime modifies a taxpayer's regular taxable income. If the AMT is greater than the regular federal income tax, the individual must pay the AMT instead of the regular federal income tax. The difference between the AMT and regular federal income tax is considered a refundable tax that can be applied over the next seven years to reduce the amount of regular federal income tax that the taxpayer would otherwise be required to pay. Certain trusts are also subject to the AMT.