Updated: 2023-11-14

The 2023 government of Canada announced changes to the Alternative Minimum Tax (AMT) system which may impact the benefits of making significant donations starting in 2024.

Several changes to the AMT system have been proposed but we have highlighted those that may have the greatest impact on gifts to Charities.

What is the AMT?

AMT is a parallel tax calculation for individuals to ensure that those who benefit from preferential tax treatment for income or tax deductions, always pay a minimum amount of tax.

Taxpayers must calculate their federal tax owing under the regular tax system and under the AMT method, and then pay the higher of the two amounts.

The AMT allows fewer deductions, exemptions and tax credits compared to ordinary income tax rules.

How will the AMT change?

Some of the most significant changes to the AMT are as follows:

• The AMT rate will increase to 20.5 percent (from 15 percent) so that taxpayers subject to AMT pay more taxes

• The basic exemption increases to $173,000 (from $40,000) so fewer taxpayers will be subject to the tax

• 100% of capital gains will be included for AMT, up from 80% currently

• 30% of capital gains on donated publicly traded securities will be included for AMT, up from 0% currently

• 50% of non-refundable tax credits will be deductible for AMT, down from 100% currently. This applies to both cash and in-kind donations (including publicly traded securities)

What does this mean for CAWST’s donors?

Starting in 2024, the new AMT rules may create a higher tax cost associated with making sizeable donations (by triggering AMT).

For donors contemplating a significant gift to CAWST of publicly traded securities or cash, doing so within 2023 may be beneficial. CAWST is grateful to all of our donors for any and all gifts of support and we are glad when they may enjoy added gifting benefits.

It is important to work closely with investment and tax advisors to understand how the changes may impact you, and carefully consider the amount and timing of charitable donations.

The proposed rules are complex but there are ways donors can continue to support Charities and mitigate the effects of the proposed changes.

If you have further questions related to donating securities or any other types of giving, we’re always here to help. Please don’t hesitate to contact Tracy Quon at tquon@cawst.org.