Minimum tax

Minimum tax limits the tax advantage you can receive in a tax year from certain incentives. You have to pay minimum tax if it is more than the federal tax you calculate in the usual way. If you reported a taxable capital gain on line 127 of your return or if you claimed any of the following:

  • a loss (including your share of a partnership loss) resulting from, or increased by, claiming capital cost allowance on rental properties;
  • a loss from a limited partnership;
  • most carrying charges (line 221) on certain investments;
  • a loss from resource properties resulting from, or increased by, claiming a depletion allowance, exploration expenses, development expenses or Canadian oil and gas property expenses;
  • a deduction for an employee home relocation loan on line 248 of your return;
  • a deduction for security options on line 249 of your return;
  • a federal political contribution tax credit on lines 409 and 410 of your Schedule 1;
  • an investment tax credit on line 412 of your Schedule 1;
  • a labour-sponsored funds tax credit on line 414 of your Schedule 1;
  • a federal dividend tax credit on line 425 of your Schedule 1; or
  • an overseas employment tax credit on line 426 of your Schedule 1.

To calculate the adjusted taxable income for minimum tax, complete Form T691, Alternative Minimum Tax. If the adjusted taxable income calculated on this form exceeds the basic exemption of $40,000, you may have to pay minimum tax.

Note

For the purpose of calculating the alternative minimum tax adjusted taxable income for your 2006 to 2011 income tax returns, an election to restrict your limited partnership losses only for partnerships that are tax shelters can be filed within 90 days of the Royal Assent of Bill C-4, Economic Action Plan 2013 Act, No. 2. Bill C-4 received Royal Assent on December 12, 2013.

Tax tip

You may be able to claim a credit against your taxes for 2013 if you paid minimum tax on any of your returns for 2006 to 2012 (see line 427).

Example

Paul claimed a $50,000 deduction in 2013 for carrying charges. Because this deduction is more than $40,000, Paul may have to pay minimum tax. To find out, he should complete Form T691, Alternative Minimum Tax

Forms and publications