About the Capital Gains Changes

From 50% to 66.7%

Last April the federal government announced that the capital gains tax would be increased, and to take effect on June 25, 2024. This change includes increasing the capital gains inclusion rate from 50% to 66.67% for capital gains over $250,000 annually for individuals.

The Increase Remains a Proposal

Yet here we are at the end of the year and the proposed increase in capital gains has not been made into law. Furthermore, the conservatives voted twice against the government’s notice to amend the Income Tax Act. Given that, should an election be imminent, it is doubtful a conservative government if elected would continue with the change.

A Potential for Delay or Abandonment

The accounting firm Krp wrote the following in an article. You can Link to the KRP Article or Google “Implementation of new capital gains rules remains uncertain”
“…the Canada Revenue Agency is in the difficult position of being required to retroactively collect a tax increase that has been applied but could technically still be delayed or abandoned altogether.” Despite this, the CRA, through their guidance, encourages the filing of returns based on the proposed legislation.

What if the Proposal Does Not Become Law?

If the tax proposal does not become law, to receive a return of any additional tax paid, a taxpayer would have to file an amendment and request a refund for any overpayment.

How Were Some Property Owners Affected

As mentioned, the federal government announced the draft legislation in April of 2024 with an effective date of two months down the road. This caused some property owners of a second property to sell before the June 25 effective date. This urgency to sell could have caused a lower sale price than might have otherwise been achieved. After all, savvy buyers would take advantage of a seller desperate to sell. Yet this shortfall in the price received is not an amount that can be refunded.

Given the current and negative political climate, the proposal has created confusion among property owners that only contributes to uncertainty in the market.