Author: Spence Walker

News and Insights

Deferral of the Government of Canada Capital Gains Rate Tax Increase

January 31, 2025

Sector:

The Department of Finance has announced that the Government of Canada is deferring the implementation of the Capital Gains Inclusion Rate (a proposed increase from 50% to 66 2/3%) from June 25, 2024, to January 1, 2026.

Additionally, the Government has made some further allowances:

  • The Lifetime Capital Gains Exemption will be increased to $1.25 million, from the current amount of $1,016,836
    • Indexing of this amount will start as of Jan 2026;
  • The Canadian Entrepreneurs’ Incentive has been introduced to encourage entrepreneurial behaviour.  It will reduce the inclusion rate to 1/3, on a lifetime maximum of $20 million in eligible capital gains.

Full details of the Government announcement can be found here.

Other key points to note:

  • The deadline for making donations eligible for tax relief in the 2024 tax year has been extended to February 20, 2025It is expected that there will be changes to the taxation of employee stock options
  • This will impact all clients with T4 income (especially with employers where there was a 33% deduction for post-June 24 2024 stock exercising);
  • Additionally, any withholding taxes on non-resident payment will likely be at 25% and not at the enhanced 35% rate.

If public sentiment is any indication, these are welcome changes.  As per, The Honourable Dominic LeBlanc, Minister of Finance and Intergovernmental Affairs:

…” The deferral of the increase to the capital gains inclusion rate will provide certainty to Canadians, whether they be individuals or business owners, as we quickly approach tax season. Given the current context, our government felt that it was the responsible thing to do. I look forward to further conversations with Canadians on how we can ensure Canada’s fiscal policy encourages robust and sustained economic activity in every region of our country”…