Capital Gain Tax After June 25 2024

Property Sales and Exemptions:

  • The 2024 budget maintains exemptions for capital gains from selling a primary residence.
  • Lifetime capital gains tax exemptions on the sale of small business shares, farming, and fishing property remain unchanged.

The 2024 federal budget includes significant new spending on projects and programs, relying on revenue from a change to the capital gains inclusion rate to help pay for it. Here’s a breakdown of what this change entails:

Capital Gains and Taxation:

  • Capital gains refer to the profit made from selling assets like real estate, stocks, or mutual funds.
  • The tax on capital gains does not include profits from selling a primary residence or gains from tax-sheltered accounts like RRSPs or RESPs.

Current Taxation System:

  • Currently, only 50% of capital gains are taxable.
  • Individuals are taxed on half of the profit from capital gains.
  • There are exemptions for primary residences and certain investment vehicles.

Proposed Changes:

  • The 2024 budget suggests increasing the “inclusion rate” from one-half to two-thirds on capital gains exceeding $250,000 for individuals.
  • For gains above $250,000, two-thirds of the capital gains would be taxable.
  • Corporations and trusts would also be subject to the two-thirds tax rate on all capital gains.
  • The proposed changes are set to take effect on June 25.

Impact on Canadians:

  • The lower tax limit of $250,000 aims to target high-income individuals.
  • Most Canadians, including 28.5 million who don’t earn capital gains and three million with gains below the threshold, are not expected to be affected.
  • Only 0.13% of Canadians, with an average income of around $1.4 million annually, are projected to pay more in personal income tax on their capital gains due to the change.
Capital Gain TaxCapital Gain Tax Calculation

Capital Gain Tax Calculation

Current Calculation
Original Purchase Price:$500,000
Current Sold Price:$900,000
Profit:$400,000
Current Capital Gain Tax at 50%:$100,000
After June 25th 2024
Original Purchase Price:$500,000
Current Sold Price:$900,000
Profit:$400,000
New Capital Gain Tax (First $250,000):$62,500
Plus profit over $250,000:$50,002.50
Total Capital Gain Investment tax payable:$112,502.50
New Capital Gain Tax Rate if Property is under corporation
Original Purchase Price:$500,000
Current Sold Price:$900,000
Profit:$400,000
Total Capital Gain Investment Tax:$133,340