Capital Gains Tax Changes in Canada: What You Need to Know

Increased Inclusion Rate on Capital Gains

Budget 2024 proposes to increase the capital gains inclusion rate for capital gains realized on or after January 1, 2024. The current inclusion rate of 50% will be increased to 75%, effectively increasing the taxable portion of capital gains.

Impact of Increased Inclusion Rate

The increased inclusion rate means that individuals and corporations will pay more taxes on capital gains. For individuals, the effective capital gains tax rate will increase from 25% to 37.5%. For corporations, the effective capital gains tax rate will increase from 15% to 22.5%.

Other Proposed Changes

In addition to the increased inclusion rate, Budget 2024 also proposes several other changes to capital gains taxation:

• Elimination of the capital gains deduction for active business income
• Increased lifetime capital gains exemption for business owners
• Taxation of capital gains earned by corporations and trusts at the two-thirds rate

Implications for Taxpayers

The proposed changes to capital gains taxation are significant and will have a material impact on individuals, corporations, and trusts. Taxpayers should carefully consider the implications of these changes and consult with a tax professional to understand how they will be affected.

Conclusion

Budget 2024 proposes a number of changes to capital gains taxation in Canada. These changes are aimed at increasing tax revenue and ensuring fairness in the tax system. Taxpayers should be aware of these changes and plan accordingly.