It likely comes as no surprise that the marginal tax brackets have been adjusted, but you may be surprised that there have been significant changes to Alternative Minimum Tax (AMT) rules. The AMT system imposes a minimum level of tax on taxpayers who claim certain tax deductions, exemptions or credits to reduce the tax that they owe. Under the AMT system, there is a parallel tax calculation that allows fewer deductions, exemptions and credits than under the regular income tax calculation.
For 2024, the government has broadened the AMT base with a goal to better target high-income individuals. Some major changes to be aware of include:
Capital gains tax — Under the AMT system, capital gains will now be 100% taxable, where they are only 50% taxable under the regular tax system.
Employee stock options — Employee stock option benefits will all now also be 100% taxable under the AMT system, whereas some employee stock option benefits qualify for a 50% deduction under the regular tax system.
Donations of publicly traded securities — For 2024, 30% of capital gains on publicly-traded securities donated in-kind will be taxable, whereas no part of these capital gains are taxable under the regular tax system.
These numbers are all significant increases in the taxable amounts from previous years. In addition, the government will be disallowing 50% of various AMT deductions and credits including:
- Employment expenses
- Moving expenses
- Childcare expenses
- Interest and carrying charges incurred to earn income from property
- Limited partnership losses
- Non-capital loss carry overs
- Charitable donations tax credit
- Medical expenses tax credit
Speak with your wealth management advisor or tax specialist to learn more about how these changes could impact your financial strategy. By starting your tax planning earlier in the year, you’ll be better positioned to adjust your financial strategy to minimize the impact of AMT if it applies to you.
