Changes to Canada’s Capital Gains Tax in 2024

In the 2024 Federal Budget, Canada introduced a significant change in capital gains taxation, increasing the inclusion rate from one-half to two-thirds for certain capital gains realized after June 25, 2024. This adjustment impacts the taxable portion of capital gains, particularly affecting corporations and trusts, and individuals with annual gains exceeding $250,000. For individual gains below this threshold, the inclusion rate remains at one-half.

The delayed implementation until June 25 offers taxpayers a strategic period to manage their investments. Many may choose to realize their capital gains early to avoid the higher taxable portion. This is especially relevant for assets likely to appreciate, such as real estate (excluding primary residences) and business shares.

This change challenges the Tax Act’s integration principle, which strives for tax neutrality whether income is earned directly or through a corporation. The new, higher inclusion rate for certain gains disrupts this balance, potentially leading to different tax burdens for corporations versus individuals.