Capital Gains Tax Change 2024 – What Does It Mean

April 19, 2024 [taxes, corporate law]

The Canadian federal government has indicated in its federal budget for 2024 that effective as of June 25, 2024, the inclusion rate for capital gains tax will be increased.

With respect to individual taxpayers, the inclusion rate of 50% of capital gains will continue on the first $250,000 of capital gains, while all gains above the $250,000 threshold will be subject to a Two-Thirds inclusion rate (being 66.666%).

With respect to corporations and trusts, the inclusion rate will be Two-Thirds on all capital gains, from the present one-half inclusion rate.

This means that on the disposition of property subject to capital gains tax, where there was a capital gain of $500,000, of which only $250,000 was effectively taxed, the new tax dynamic will be as follows:

• for an individual taxpayer, the inclusions would be $125,000 (50% of first $250,000) and $166,666.67 (66.667% on the excess), meaning that now $291,666.67 is subject to tax (an increase of $41,666.67 being subject to tax)

• for a business or trust, $333,333.33 is now subject to tax (an increase of $83,333.33 being subject to tax)

Those are the raw specifics of these anticipated changes to capital gains taxation in Canada, with the tax consequences being highly significant.

The federal government is proposing some relief through a Canadian Entrepreneur’s Incentive, while professional tax planning looks at implementing potential tax planning structures that would trigger the capital gains now at the current inclusion rate, in advance of the imposition of the higher inclusion rate.

If you are considering the implementation of tax planning strategies to deal with this increase in the capital gains’ inclusion rate, or are pursuing other legitimate avenues related to tax structuring, contact our law firm for a confidential initial consultation at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com.

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