What the alternative minimum tax does
The CRA describes minimum tax as limiting the tax advantage you can receive in a year from certain incentives. It does this by recalculating your income on a different basis: some deductions are reduced or added back, and the non-taxable part of capital gains is brought back in. A basic exemption is subtracted, a flat rate is applied, and only part of your credits is allowed.
For 2025, the T691 form uses a basic exemption of $177,882 and a 20.5% rate. Credits are allowed at 50% in general, and donations at 80%. If the result is higher than your regular federal tax, the difference is your AMT. The CRA reissues the form each year, so check the current year’s version for the figures that apply to you, and be wary of older explanations that quote different numbers.
Who is likely to be affected
The CRA’s screening on line 41700 asks you to add up certain claims and, if you have a taxable capital gain, the amount from Schedule 3 line 19700. For 2025 a total of $177,882 or less means you probably do not owe it. Above that, you may have to complete Form T691.
Common triggers include a large capital gain, the lifetime capital gains exemption, rental losses created by capital cost allowance, most carrying charges on certain investments, non-capital losses from other years, moving or child care expenses, and the dividend tax credit. Most employees with ordinary income never see it.
An illustrative example
Suppose you sell a cottage that is not your principal residence and report a large capital gain in a year when your other income is modest. The regular calculation taxes only the taxable half. The AMT calculation adds the rest back, so your adjusted income can climb well above the exemption. These numbers are illustrative only.
If AMT then exceeds your regular tax, you pay the higher figure. The extra is not lost: it becomes a carryover that you may claim on line 40427 in a later year when your regular tax is higher than your minimum tax, provided you use it within seven years.
Ontario, records and what to discuss with your accountant
The CRA notes you may also need to complete Form ON428 or Form T2203 for provincial tax on a minimum tax basis. Your notice of assessment shows any carryover. Keep the T691 and your working papers.
Ask your accountant to model AMT before a large sale, an exemption claim or a large investment loan, and to plan how to use any carryover over the seven years.
Sources & editorial notes
Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
- Line 41700 – Minimum taxCanada Revenue Agency
- T691 Alternative Minimum TaxCanada Revenue Agency
- Form T691, Alternative Minimum Tax (2025)Canada Revenue Agency
- Line 40427 – Minimum tax carryoverCanada Revenue Agency
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.