On the program today is Fidelity’s Vice President of Tax Research Peter Bowen and host Kelly Roberts, Vice President of National Accounts for a deep dive into how the Alternative Minimum Tax works and the changes you can expect. Earlier this year, the Federal 2023 budget announced significant changes to the Alternative Minimum Tax system. The changes apply to certain areas like inclusion rate on capital gains, and stock options. So how will this affect investors? And what should advisors keep in mind when informing their clients of these changes? Peter says changes to the Alternative Minimum Tax or AMT doesn’t come into effect until next year. Some key highlights - the tax rate on newly calculated tax base (for AMT) is going up from 15% to 20.5%. This is federal rate, provincial rates are layered on top. Peter says the good news is the exemption is increasing from $40 000 to $173 000 – this is the deductible amount before calculating tax burden based on increased rate. He adds 80% of capital gains is included in calculation, next year will be 100%. In terms of advisor planning for the changes to the AMT, Peter says is less of providing tax advice but helping clients be aware of changes and suggesting the right strategies. Changes don’t come into effect until next year, so if your client is looking to sell something with significant capital gains, could be done before year end. And they are planning on using capital loss this year, maybe delay that as in future years will only be able to use 50% of that.

Recorded on September 14, 2023.

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