Capital Gains Taxation: What's Changing and How It Affects You

Proposed Increase in Inclusion Rate

The federal government has introduced a proposal to increase the capital gains inclusion rate from 50% to 66.67% for capital gains exceeding $250,000 for individuals. This change, if implemented, would affect capital gains realized on or after June 25, 2024.

Fairer Tax System

The proposed changes aim to create a more equitable tax system. According to the government, the current 50% inclusion rate provides an unfair advantage to individuals with significant capital gains, as they are only taxed on half of these gains.

Increased Lifetime Capital Gains Exemption for Business Owners

In addition to the inclusion rate increase, the government has also proposed raising the lifetime capital gains exemption for business owners from approximately $1 million to $1.25 million. This change would allow business owners to defer taxes on a larger portion of their capital gains when they sell their businesses.

Impact on Capital Gains Taxpayers

The proposed changes could have a significant impact on taxpayers with substantial capital gains. Individuals who sell assets, such as stocks, bonds, or real estate, at a profit would be subject to the higher inclusion rate, resulting in potentially more capital gains being taxed.

Conclusion

The federal government's proposed changes to capital gains taxation are designed to make the tax system fairer and to address concerns about tax avoidance. These changes, if implemented, could have a significant impact on taxpayers with capital gains, particularly those with gains exceeding $250,000.