The new rules regarding capital tax will apply for this tax season until further notice, despite the vagueness created by the prorogation of Parliament and the announcement of the resignation of Prime Minister Justin Trudeau. For the moment, the Canada Revenue Agency (CRA) declaration forms will take into account the changes to the inclusion rate announced last year.
What is happening?
By email, the Department of Finance of Canada confirmed Tuesday that “the Canada Revenue Agency is administering the changes to the capital gains inclusion rate that came into effect on June 25, 2024.” The declaration forms will be made available from from January 31.
The CRA thus respects the changes set out in the notice of ways and means motion tabled on September 23, 2024, even if they have not yet received parliamentary approval.
“Parliamentary convention states that tax proposals are effective as soon as the government files a notice of ways and means motion; this approach ensures consistency and fairness in the treatment of all taxpayers,” underlines the ministry by email.
However, when Parliament resumes its functions on March 24, “if no bill is adopted in the House of Commons, and if the government indicates its intention not to pursue the proposed measure, the Agency would stop administering it,” indicates the ministry.
What does the measure provide for?
Since June 25, the capital gains inclusion rate has increased from 50% to 66.7% for the portion of gains exceeding $250,000.
As a reminder, a capital gain corresponds to income derived from the sale of an asset (for example: shares, a chalet or a duplex) at a price higher than its acquisition cost.
If a capital gain is less than $250,000, half of it (50%) is added to the taxpayer’s taxable income.
If a capital gain is greater: we add half (50%) of the first $250,000 of gains to the taxpayer’s taxable income and we add two-thirds (66.7%) of all gains exceeding this threshold.
Who is affected?
According to a recent study by the Chair in Taxation and Public Finance at the University of Sherbrooke, very few taxpayers are targeted by this measure. According to tax data analyzed in the study, approximately 0.16% of Canadian taxpayers declared a capital gain greater than $250,000 in 2019.
To watch on video
Canada
