Personal Tax -> Dividend tax credits -> Alternative minimum tax

Income Tax Act s. 127.5

Alternative minimum tax (AMT) as it relates to Canadian dividends

Our Canadian tax calculator calculates alternative minimum tax.

Dividends eligible for the enhanced dividend tax credit

In the following table, the Federal column for eligible dividends shows the amount of actual dividends that can be earned before federal AMT kicks in, if there is no income other than the dividends.  The provincial columns show the amount of actual dividends that can be earned in each province before any regular provincial income tax (net of any low income tax reduction) is payable.  However, if this amount exceeds the amount of dividends in the Federal column, AMT will be payable for all provinces except Québec, which does not base its AMT on the federal AMT.  The provincial columns also show the total amount of regular federal income tax, plus federal and provincial AMT payable at the indicated amount of dividends, for 2009.

(1)  Excludes Ontario Health Premium
(2)  The BC, NL and ON AMT rates are calculated as lowest provincial tax rate / lowest federal tax rate.

Due to the fact that Alberta's tax rate is 10%, and the enhanced dividend tax credit is 9.993% (10% in 2010 and later years) of taxable dividends, there is no basic provincial tax payable on those dividends until they reach many millions of dollars.  This is why we have indicated "n/a" for Alberta above.

Provincial AMT is calculated as a % of federal AMT, except for Quebec.  Thus, even though the eligible dividends may not reach the taxable level in a particular province, they will still be subject to AMT if there is federal AMT.  Quebec's AMT is not based on the federal AMT, and Canadian dividends, eligible or non-eligible (small business) do not incur AMT in Quebec.

This article only relates to AMT regarding eligible Canadian dividends.  AMT may be applicable in other situations when taxpayers have high incomes, yet have little tax payable on the income.  The exemption level for federal AMT is $40,000.

For more information on alternative minimum tax, see the Canada Department of Finance Alternative Minimum Tax web page.  The AMT is calculated on form T691.

Small business, or non-eligible, dividends

The following table for small business dividends shows the amount of actual dividends that can be earned in 2009 before any regular income tax is incurred, when there is no income other than the dividends.  Alternative minimum tax is not incurred at any level of these dividends.

(1)  Excludes Ontario Health Premium

Tax Tip:  Everyone's situation differs.  Seek the advice of a professional tax advisor if you think there is any possibility you may be subject to alternative minimum tax.