In April, Deputy Prime Minister and Finance Minister Chrystia Freeland presented the 2024 Federal Budget. In order to provide “a fair chance to build a good middle-class life”, the approach focuses on building more affordable homes, making life cost less, and growing the Canadian economy in a way that’s shared by all.

Below, we will discuss some of the relevant changes that Canadian investors should be aware of.

Capital Gains Inclusion Rate for Individuals, Corporations and Trusts

The Budget outlined an increase in taxes on capital gains, effective June 25, 2024. For individuals, the capital gains inclusion rate for capital gains in excess of $250,000 will increase from one half to two thirds. This is net of capital losses applied, that may have been incurred in the current year or previous years.

For corporations and trusts, the inclusion rate for all capital gains realized will increase from one half to two thirds.

Canadian Entrepreneurs Incentive

The capital gains inclusion rate will be 33.3% on a lifetime maximum of $2 million in lifetime capital gains, which will come in effect gradually over the next 10 years.

Lifetime Capital Gains Exemption

The lifetime capital gains exemption will be increased from $1.01 million to $1.25 million, effective June 25, 2024. This applies to small business shares, farming and fishing property. Starting again in 2026, this amount will continue to be indexed to inflation.

Home Buyers Plan

Effective immediately, Canadians may withdraw $60,000 from their Registered Retirement Savings Plan (RRSP) to buy their first home. This is an increase from $35,000. Additionally, the repayment period has been lengthened for individuals who make their first withdrawal between 2022 and 2025.

Alternative Minimum Tax (AMT)

The AMT rules that were introduced in 2023 are being adjusted. This will apply to taxation years beginning after 2023. Most notably, individuals will be able to claim 80% of the charitable donation tax credit, increased from 50%.

What is not changing?

Canadians will continue to benefit from:

• The principal residence exemption. The appreciated value of your primary home remains tax-free.
• Tax-deferred savings plans such as the Registered Retirement Savings Plan (RRSP).
• Tax-free savings plans such as the Tax-Free Savings Account (TFSA).
• The same taxation on individual capital gains of less than $250,000.

We are always here to discuss the impact to investment portfolios, and partner with our client’s accountants in doing so. We are happy to facilitate a referral to an accountant where appropriate.

Smith Falconer Financial Group continues to believe in the importance of focusing on long-term investment goals, and not the headlines of the day. Tax implications should not be the reason you make a long-term investment decision.