You know what they say . . . the only sure things in life are death and taxes.
And while tax consistently affects nearly every aspect of our lives, the rules surrounding taxes change almost every year.
We recently had Managing Director of Tax and Estate Planning at CIBC Jamie Golombek on the show to talk about what changes he is anticipating for 2024 and what Canadians can do to prepare.
According to Golombek, it’s difficult to foresee exactly what tax changes are coming our way; however, one thing we know for sure is that there will be modifications to the Alternative Minimum Tax (AMT) coming into effect.
The AMT is a separate tax system that recalculates your income, making certain adjustments, deductions, and credits to arrive at a new minimum level of tax. While this system targets high-income individuals, the new rules could mean that some people may be subject to the AMT for the first time in 2024.
Golombek refers to these individuals as “accidental high income earners” – those who may have sold a rental property or a business, for example, which will trigger a large capital gain.
Under the regular tax system, 50% of these capital gains are included in income. Under current AMT rules, 80% of a capital gain is included when calculating adjusted taxable income. However, starting in 2024, 100% of capital gains will be included in adjusted taxable income.
If you find yourself in this position, here are a few ideas that could help:
- First and foremost, get the advice you need from a tax professional. Your accountant will be able to give you advice tailored to your specific situation to help you avoid paying more tax than necessary.
- If you are in the process of selling property or a business, explore the option to finalize the sale and realize the capital gain in 2023 if possible to avoid the new rules in 2024.
- Check out Jamie’s tax saving tips on CIBC.com: Alternative Minimum Tax: What’s Changing for 2024?, Sale of a Business: Could Alternative Minimum Tax Apply?, and The Tax Incentive to Gift Securities.
Keep in mind, if you are subject to the AMT, you can recover the amount paid against your regular income tax over the next seven years.
Bottom line: Sit down with your tax advisor, crunch the numbers, and identify opportunities to do some planning before the end of 2023.