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The Federal Department of Finance announced that the capital gains inclusion rate change will be postponed to effective January 1, 2026. The announcement confirms the government’s intention that, effective for dispositions that occur on or after January 1, 2026, the inclusion rate will increase from 50% to 66.67% on capital gains realized in excess of $250,000 annually for individuals and on all capital gains realized by corporations and most types of trusts. That is all subject to the new Liberal leader will still support this tax increase or may not happen at all if they don’t support it or if the Conservatives win the next election.
As a result, the CRA has reverted to administering the currently enacted capital gains inclusion rate of 50% before 2026.
The government intends to maintain the June 24, 2024 increase to the Lifetime Capital Gains Exemption (LCGE) limit to $1.25 million of eligible capital gains.
The new Canadian Entrepreneurs’ Incentive will also proceed from 2025 onward as announced. The inclusion rate will be 33.33% on up to $400,000 of eligible capital gains.
With the change, The CRA will grant relief in respect of late-filing penalties and arrears interest until June 2, 2025, for impacted T1 Individual filers and until May 1, 2025, for impacted T3 Trust filers to provide additional time for taxpayers reporting capital dispositions to meet their tax filing obligations.
Individuals and trusts realizing capital gains in 2024 should still beware the new alternate minimum tax (AMT). See our newsletter on Changes to AMT Regime in 2024.
See CRA Newsletter: https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2025/update-cra-administration-proposed-capital-gains-taxation-changes.html
Also as a reminder, owing to the Canada Post strike during the holiday season, the deadline for making charitable donations eligible for 2024 tax credit has been extended to February 28, 2025.
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The content of this pamphlet is prepared by IMPACT CPA LLP for information only and are not intended to provide professional advice as individual situations will differ. We would be pleased to discuss your specific situation and tailor a tax plan to meet your requirements.
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