Notice to Clients: 2024 Capital Gains Changes

Posted on 13 May 2024 Back to News

 

The 2024 federal budget has brought unexpected news for taxpayers and tax professionals alike. The budget proposed changes to the capital gains inclusion rate, aimed at enhancing tax fairness by targeting wealthier individuals and entities with substantial capital gains. Under the new proposal, individuals realizing annual capital gains above $250,000, as well as all capital gains realized by corporations and trusts, will be subject to an inclusion rate of 66.7% (up from 50%).

The proposal is set to take effect June 25, 2024. This means that individuals realizing annual capital gains exceeding $250,000, as well as all capital gains realized by corporations and trusts on or after that date will be subject to the changed rates. Fortunately, the inclusion rate on capital gains realized annually up to $250,000 by an individual will stay at the previous rate of 50% to achieve the goal of more equitable tax rates. Similarly, business owners will also have access to this exemption from the increased inclusion rates as individuals.

The government has yet to provide any official legislation or potential drafts regarding these changes aside from the original proposition, leaving many uncertainties surrounding the details of the act.  With such a short window of opportunity before the changes take effect, the individuals, trusts, and corporations affected must decide whether the tax effects of realizing capital gains pre-maturely, outweigh the tax losses resulting from the increased inclusion rates come June 25th. Seeking professional advice and exploring potential restructuring options may prove beneficial in navigating the evolving tax rules.

Overall, the average taxpayer will likely go unaffected by these changes. According to the Government of Canada, 99.87% of Canadians will see no rise in their personal income tax on capital gains. Further, they have also stated that things like the principal residence exemption, and exemptions for registered pension plans among others, will not be impacted by the changes made to capital gains. These provisions ensure that the tax landscape remains stable for the majority of Canadians.

 

For any questions or financial advice relating to the matter, please consult with a qualified accountant who can provide guidance based on your individual circumstances and needs.

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