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. You may also have to pay minimum tax 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; or
- a federal dividend tax credit on line 425 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.
You may be able to claim a credit against your taxes for 2016 if you paid minimum tax on any of your returns for 2009 to 2015 (see line 427).
Paul claimed a $50,000 deduction in 2016 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.
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