by Jessica O’Brien Cameron, Associate Portfolio Manager, Wealth Advisor, CIBC Wood Gundy –
The 2024 federal budget was recently released and included a number of proposed tax measures that will affect Canadian taxpayers. Arguably, the hottest topic is the proposed increase to the capital gain inclusion rate. Under the current rules, if property such as investments are sold for a profit, only 50% of the capital gain is included in taxable income. This excludes your principal residence, which is exempt from capital gains tax on its sale.
The introduction of capital gains tax was adopted in the U.S during the 1860s to support Civil War efforts, and the U.K. in the 1960s to fund social security initiatives. Canada jumped on board in 1972 at a rate of 50%. This increased to 66.67% in 1988 and to 75% in 1990. In 2000, the rate was reduced to 50%, where it has remained.
The 2024 budget has proposed to increase the capital gain inclusion rate from 50% to 66.67%. This rule would apply to all capital gains earned in corporations and trusts and to the portion above $250,000 in annual capital gains for individuals. The new inclusion rate will take effect for capital gains realized on or after June 25, 2024. For individuals, there will also be a $250,000 threshold for capital gains realized between June 25 to December 31, 2024 before the higher inclusion rate applies.
Capital losses carried forward from prior years will continue to be deductible against taxable capital gains in the current year by adjusting their value to reflect the inclusion rate of the capital gains being offset.
Check Your Unrealized Gains
All investors, especially individuals who own investments with unrealized capital gains in their corporations or trusts, should consult with their advisors and tax accountants to determine whether crystalizing some of these gains prior to June 25, 2024, makes sense for their situation. For more information visit: https://tinyurl.com/pke7ssy8.
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Jessica O’Brien Cameron is a Wealth Advisor with CIBC Wood Gundy in Sidney. The views of Jessica O’Brien Cameron do not necessarily reflect those of CIBC World Markets Inc. CIBC Private Wealth consists of services provided by CIBC and certain of its subsidiaries, including CIBC Wood Gundy, a division of CIBC World Markets Inc. The CIBC logo and “CIBC Private Wealth” are trademarks of CIBC, used under license. “Wood Gundy” is a registered trademark of CIBC World Markets Inc. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.
