Canada’s 2024 Budget Eyes Hike in Capital Gains Tax Rate

Impending Changes to Canada’s Capital Gains Tax

In a move that could have significant implications for investors and taxpayers, Canada’s federal government has proposed an adjustment to the capital gains inclusion rate in its 2024 budget. This adjustment, slated to take effect on June 25, 2024, will see the rate increase from the current 50% to 66.67% for certain entities and individuals.

Capital gains, the profit realized from the sale of assets such as stocks, bonds, or real estate, are partially taxable in Canada. Presently, only half of these gains are subject to tax. However, under the new budget proposal, corporations and trusts will be taxed on two-thirds of their capital gains. Similarly, individuals with capital gains exceeding $250,000 will also face the increased inclusion rate. Those with gains below this threshold will continue to be taxed at the current rate.

The proposed changes are expected to predominantly affect those dealing with high-value transactions. For example, selling a secondary property or investment that yields a profit of over $250,000 would subject the individual to the higher inclusion rate. It’s important to note that primary residences remain exempt from capital gains tax.

With the majority of Canadians not expected to have any capital gains income, or to fall below the $250,000 mark, the federal government anticipates that these changes will not impact most taxpayers. Nevertheless, for those who may be affected, consulting with a tax advisor or financial planner could provide strategies to mitigate the impact of these proposed tax increases.

As always with financial matters, it is crucial to seek professional advice tailored to one’s personal circumstances. The information provided here is not intended as legal or professional advice but rather as a general overview of the upcoming changes to Canada’s tax landscape.

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