Minimum tax

Minimum tax limits the tax advantage you can receive in a year from certain incentives. You have to pay minimum tax if it is more than the federal tax you calculate in the usual manner.

To find out if you have to pay this tax, add the amounts shown in B below and 60% of the amount on line 127 of your return. If the total is $40,000 or less, you probably do not have to pay minimum tax. If the total is more than $40,000, you may have to pay minimum tax. Therefore, get and complete Form T691, Alternative Minimum Tax.

You also may have to complete Form 428 to calculate additional provincial or territorial tax for minimum tax purposes.

Here is a list of the most common situations where you may have to pay minimum tax:

A. You reported a taxable capital gain on line 127 of your return.

B. You claimed any of the following on your return:

  • 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 that is a tax shelter
  • 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 on line 249 for security options

C. You claimed any of the following tax credits on your Schedule 1:

  • a federal political contribution tax credit on line 410
  • an investment tax credit on line 412
  • a labour-sponsored funds tax credit on line 414
  • a federal dividend tax credit on line 425
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