The future of Canada’s capital gains tax changes remains uncertain as the federal government’s proposed increase to the capital gains inclusion rate has yet to be officially passed into law. While the government has announced a plan to alter tax regulations starting June 25, 2024, it is unclear if these changes will come to fruition.
The government’s plan includes significant adjustments to how capital gains are taxed. Here are the key proposals:
- Inclusion Rate for Individuals. A one-half inclusion rate will continue for the first $250,000 of capital gains in a single year. Any capital gains above this threshold will be taxed at a two-thirds (66.67%) inclusion rate, with only one-third exempt.
- Corporations. All capital gains for corporations will be taxed at a two-thirds inclusion rate, meaning only one-third will be exempt from taxation.
- Trusts. Similar to corporations, all capital gains earned within a trust would also face a two-thirds inclusion rate. However, exemptions for graduated rate estates and qualified disability trusts will allow a $250,000 exemption like that for individuals.
The proposal is currently in a state of legal limbo. The federal government initiated this process with a notice of ways and means motion on June 10, but even though the motion was passed, it still awaits formal enactment. A draft bill introduced on September 23 has not yet been passed.
The possibility of a federal election is one factor to consider. If an election occurs before the proposed changes become law, the likelihood of these tax adjustments being implemented decreases significantly.
As the government seeks to make the tax system fairer, taxpayers are advised to stay informed and consult professionals to navigate these uncertain times. Stay on top of your tax obligations with Legend Fusions.
Jeffrey Ross
Jeffrey Ross is an experienced tax accountant focused on US-Canada cross-border taxation, with over three years in the industry, including a key role as client manager at a Canadian tax firm. He provides expertise in corporate and personal tax planning, specializing in non-resident tax, capital gains, CRA and IRS compliance, and retirement planning. Known for his personalized approach, Jeffrey is dedicated to guiding clients with clear, practical advice tailored to complex tax scenarios, aligned with the evolving tax laws.
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