Capital Gains Inclusion Rate Update: Who Does it Affect?
The inclusion rate for capital gains has increased from 50% to 66.67% for certain gains. Find out if your portfolio or cottage sale will be impacted.
Capital Gains Inclusion Rate Update: Who Does it Affect?
One of the most significant changes in recent budgets is the adjustment to the Capital Gains Inclusion Rate. This change aims to improve tax fairness but has implications for investors and business owners.
The Change
Previously, 50% of any capital gain was taxable. Effective June 25, 2024, the inclusion rate increased to 66.67% (2/3) for:
- Corporations and Trusts (on all capital gains).
- Individuals (on the portion of capital gains exceeding $250,000 in a year).
Who is Safe?
Most Canadians will not be affected. If you are selling a stock portfolio with a $20,000 gain, your inclusion rate remains 50%. The $250,000 threshold for individuals is quite high.
Who is Impacted?
- Cottage Owners: If you sell a secondary property with significant appreciation (e.g., a $500,000 gain), the amount over $250,000 will be taxed at the higher rate.
- Business Owners: Selling a business inside a corporation or personally might trigger higher taxes.
- Estate Executors: Upon death, deemed disposition of assets might push total gains over the $250k limit.
Talk to your accountant about timing your asset sales to potentially spread gains over multiple years to stay under the threshold.