AMT rule changes are banging at the door, and unprepared donors and charities should be worried

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Funding Matters Inc.

Nov 07, 2023, 08:17 ET

TORONTO, Nov. 7, 2023 /CNW/ - In less than two months, the Alternative Minimum Tax (AMT) rule changes will take effect on January 1, 2024. The changes are a much-discussed source of concern among charities, donors, and advisors.

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According to Bill Petruck, CEO of FUNDING matters® Inc, under the new federal rule changes only half of your donation tax credit can be applied against the AMT, down from 100 percent. In the 2023 federal budget, the government proposed increasing the AMT rate to 20.5 percent, up from 15 percent under the existing rules. The AMT exemption level will increase to $173,000 from $40,000. As well, 30 percent of capital gains on the donation of publicly listed securities (stocks and mutual funds) will now be included in the adjustable taxable income. Self-employed high-income donors won't be subject to the AMT, but if they realize a large capital gain from the sale of a qualified small business corporation, the AMT may apply.

The good news, says Petruck, is there's still time for donors to address their assets and taxes – today and moving forward. He offers three strategies to act on right now:

  1. Donate appreciated non-registered public securities (e.g., stocks, mutual funds, ETFs) in 2023 without AMT impact.

  2. Pre-fund a private foundation or Donor Advised Fund (DAF) in 2023 using appreciated securities and make distributions to any registered charities in Canada in any year thereafter.

  3. Consider exercising any planned liquidity events (e.g., options, stocks or mutual funds with large capital gains, the sale of a business or investment real estate) in 2023 to avoid increased capital gains tax inclusion and use charitable donations in 2023 to reduce the resulting tax.

FUNDING matters Inc® continues to inform, educate, and empower donors to make strategic, tax-beneficial moves before these changes take place.

SOURCE Funding Matters Inc.

Bill Petruck, President and CEO, FUNDING matters® Inc., 416-249-0788 (Office), 416-579-0870 (Cell), 800-856-1354 (Toll-free).

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Funding Matters Inc.