AMT on a Canada Growth Incentive exit: the 30% inclusion, by the numbers

Yes. Budget 2026 includes CGI-exempt gains at 30% in the Alternative Minimum Tax base. With a $160,000 salary, a fully exempt $15,000,000 Ontario exit still owes about $887,898 in federal AMT (20.5% above the $181,440 exemption) plus $218,689 in Ontario AMT. The 7-year carryforward recovers only part of it unless later income is high.

How the 30% AMT inclusion works

The Alternative Minimum Tax (AMT) is a parallel calculation. As the Budget 2026 annex puts it, it “allows fewer tax credits, deductions, and exemptions than the ordinary personal income tax rules allow,” and “taxpayers pay either regular tax or AMT, whichever is higher.” For the Canada Growth Incentive the annex adds one rule: “Capital gains exempted through this measure would be subject to an inclusion rate of 30 per cent for the purposes of the AMT, consistent with the treatment of gains eligible for the Lifetime Capital Gains Exemption.”

The 2026 federal AMT parameters under Income Tax Act ss. 127.5–127.55 are:

• Rate: 20.5% on adjusted taxable income above the exemption.
• Exemption: $181,440 for 2026. It equals the start of the 29% federal bracket and is indexed each year.
• Capital gains in the AMT base: 100% of ordinary capital gains; 30% of gains sheltered by the LCGE or, as proposed, the CGI.
• Credits: only 50% of most non-refundable credits (including the basic personal amount) can be used against AMT.
• Carryforward: AMT in excess of regular tax can be carried forward up to 7 years (s. 120.2).

Worked example: a $10,000,000 gain fully exempt under the CGI, a $160,000 salary in the same year, and Ontario residence.

The founder pays no regular capital-gains tax on the $10M, but owes about $580,398 of federal AMT and $142,952 of Ontario AMT in the exit year. That cash is due with the exit-year return, so it belongs in the liquidity plan for the sale proceeds.

Why large gains hit AMT even without the CGI

Many founders assume AMT is a cost of the exemption. Under the AMT rules in force since 2024, though, AMT also applies to large gains that are not exempt. Regular federal tax includes 50% of a gain at the 33% top rate, about 16.5% of the gain. AMT includes 100% of it at 20.5%. Once the gain is large enough to swamp the $181,440 exemption, the AMT figure is higher.

So the fair comparison is not “CGI with AMT” against “no exemption without AMT.” Both scenarios carry exit-year AMT, and the CGI still cuts the all-in bill dramatically. At $15M in Ontario it falls from $4,724,833 to $1,106,587.

Exit-year AMT at $2M, $5M, $10M and $15M

At $15M the CGI scenario’s exit-year AMT is about 7.4% of the gain in Ontario. Tax on the salary itself is not included in the all-in rows.

13-province exit tax table

Regular tax on a capital gain depends on where you live on December 31 of the exit year. The table shows the 2026 top combined federal and provincial/territorial rate and the regular tax on a gain with no exemption. With a fully qualifying CGI claim, regular tax on each of these gains is $0 in every province. The exit-year AMT from the table above takes its place.

Rates: TaxTips.ca 2026 provincial pages (revised November 8, 2026). Ontario’s rate excludes the Ontario Health Premium. Manitoba and Yukon reach the rate shown at $400,000 and $500,000 respectively, and Newfoundland and Labrador at $1,141,275. Quebec’s 2026 provincial figures had not been confirmed by Quebec’s Ministry of Finance when we last checked.

The 7-year carryforward: how much comes back?

The annex describes the carryforward exactly: AMT in excess of regular tax “can normally be carried forward for up to seven years and applied as a credit … to the extent that the taxpayer’s regular tax payable for that year exceeds their AMT.” Each later year therefore has a recovery ceiling: regular federal tax minus that year’s federal minimum amount. On a salary alone that ceiling is modest. At $160,000 it is $29,055 a year, at $400,000 it is $60,133, and at $1,000,000 it is $135,133.

Annual ordinary income in each of the seven years after the exit, federal only. At $160,000 a year about 77% of the federal AMT ($684,511) expires unused. Full recovery within seven years needs roughly $934,000 of taxable income a year. Provincial AMT carryovers are not modelled.

For large exits, then, much of the CGI-related AMT works like a permanent tax, not a timing difference. At $15M with $160,000 of later income, about $684,511 of the federal AMT is never recovered. That is still far below the regular tax the exemption removes (22.25%–27.40% of the gain, depending on the province), but it belongs in the exit model from the start. For smaller exits the carryforward has a much better chance of recovering the federal AMT in full.

Assumptions and limits

• One individual, one tax year. The whole gain is realized in a single year. Reserves, earn-outs and instalment sales are not modelled.
• Regular tax on gains at the top rate. Unsheltered gains are taxed at the 2026 top combined rate × 50%. For large gains this is accurate to within a small margin; for small gains it slightly overstates tax.
• Credits. Only the federal basic personal amount is modelled: in full against regular tax, 50% against AMT. Other credits, the Ontario Health Premium and the Quebec abatement are ignored.
• Federal regular tax uses the 2026 brackets (14%, 20.5%, 26%, 29%, 33%; thresholds $58,523, $117,045, $181,440, $258,482).
• The CGI is a proposal. The 30% AMT inclusion comes from the Budget 2026 annex. The final legislation could differ.

Full constants and sources are on our methodology page.