What You Need to Know.

In a recent announcement, the federal government has delayed the planned capital gains inclusion rate increase. Originally set to take effect on June 25, 2024, the change will now be implemented on January 1, 2026, provided legislation is passed before the next federal election.

For now, this means taxpayers can proceed with their 2024 tax filings under current rules, avoiding any immediate changes. However, those who triggered capital gains before June 25 in anticipation of the new tax rate may be left in a difficult position.

What’s Changing?

If implemented, the taxable portion of capital gains will increase from 50% to 66.67% for:

1. Individuals with capital gains exceeding $250,000 annually
2. Corporations and most trusts

Exemptions & Incentives

The government has proposed several exemptions and incentives to ease the impact:

• Principal Residence Exemption – No capital gains tax on selling your primary home.
• $250,000 Annual Threshold – Gains under this amount will still be taxed at the 50% inclusion rate.
• Lifetime Capital Gains Exemption Increase – Rising to $1.25 million for small business shares and qualified farming and fishing properties.
• Canadian Entrepreneurs’ Incentive – Reducing the capital gains inclusion rate to one-third on up to $2 million in eligible lifetime gains.

While the inclusion rate increase is postponed, other changes, including the Lifetime Capital Gains Exemption increase and the Entrepreneurs’ Incentive, will still proceed as planned.

What This Means for You

With the shifting landscape of tax regulations, now is the time to review your long-term financial strategy. Consulting a tax professional can help you navigate these changes and optimize your tax position.

For tailored advice on how these changes may affect you or your business, contact Geib & Company today.

https://www.canada.ca/en/department-finance/news/2025/01/government-of-canada-announces-deferral-in-implementation-of-change-to-capital-gains-inclusion-rate.html

The information contained herein is general in nature and is based on proposals that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice or an opinion provided by Geib & Company to the reader. This material may not be applicable to, or suitable for, specific circumstances or needs and may require consideration of other factors not described herein.