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2024 Federal Budget Announcement – Changes to Capital Gains Inclusion Rate

Every Federal Budget announcement tends to focus on one central tax consideration that draws the attention of Canadians.  On April 16th, 2024, the Government of Canada released its 2024 Budget and interest surrounding the capital gains inclusion rate garnered significant attention because of noteworthy changes and potential planning opportunities.

 

Under current tax rules, when an individual disposes of a capital property (excluding your principal residence) for a profit, only half (50%) of the capital gain is included in your taxable income. Effective June 25th, 2024, the capital gain inclusion rate will increase to 2/3 (66.7%) of capital gains realized on any amount above $250,000. This means that capital gains realized under $250,000 as of June 25th, 2024, will remain at the 50% inclusion rate.

 

Corporations and trusts have no tax threshold and all capital gains earned as of June 25th, 2024, will be subject to the 2/3 (66.7%) inclusion of income.

 

The delay in implementing the increase in the capital gains inclusion rate to June 25, 2024, allows individuals, corporations and trusts the opportunity to capture their capital gains at the 50% inclusion rate. Triggering these gains prior to the June 25, 2024, deadline may save a significant amount of tax but there are other factors to consider as it pertains to an individual’s financial plan.

 

The 2024 Federal Budget announcement to increase the capital gains inclusion rate has generated a lot of attention and questions surrounding the financial plans of many Canadians. In continuing to proactively plan, it is important that you discuss your unique financial situation with your financial advisors so that they may provide a recommendation of the potential tax impact of the 2024 Federal Budget.

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