In  April, the federal government proposed changes to the capital gains inclusions rate. This change can impact various asset types, including non-registered investments, and real estate.

A capital gain is realized on the sale of investments and real estate when the sale price is above its adjusted cost base (ACB). Inclusion rate refers to what percentage of a gain is taxable.

For individuals, the proposed inclusion rate for capital gains is:

• Up to $250,000 in capital gains annually: Inclusion rate remains at 50%.
• Over $250,000 in capital gains annually: Inclusion rate increases to 66.67%.

For corporations and trusts the new rate applies to any capital gain.

There’s been lots of discussions surrounding realizing capital gains before June 25, 2024 to take advantage of the existing effective tax rate.

Before making any decisions, it's essential to understand how these changes will affect your situation. For liquid investments, a cost-benefit analysis can be done to compare the present net value of selling now or in the future.

If you were already planning to sell an asset, you may consider doing so before June 25, 2024, as long as this aligns with your investment goals and isn't only a tax-driven decision.

Remember, for individuals, the first $250,000 in capital gains each year remains at the current inclusion rate and the increase will not impact most Canadians.  This will also apply for the period of June 25, 2024 to December 31, 2024.

For those in their golden years, and with significant non-registered investments or a second property, care should be taken to evaluate your options as the capital gains could be high if they are realized all at once.

If you are impacted by this change, be sure to talk to your tax and legal advisors and wealth planning team to help ensure you are taking advantage of the relevant opportunities.

 

Fraser Willson, CFP, CIM | Senior Wealth Advisor | CIBC Wood Gundy | Collingwood Fraser.Willson@cibc.com | (647) 588-4344

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Fraser is an Investment Advisor with CIBC Wood Gundy in Collingwood. The views of Fraser do not necessarily reflect those of CIBC World Markets Inc.

Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.

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