Every Saturday, one of our journalists answers, along with experts, one of your questions on the economy, finances, markets, etc.
Published at 8:00 a.m.
I’m confused: to my knowledge, the motion presented in the fall was not voted on, so is the increase [du taux d’inclusion sur le gain en capital] will be applied or not for the 2024 tax year?
Hélène Fortin
The year 2024 effectively ended without the famous increase in the capital gains inclusion rate being able to be adopted by the Canadian Parliament, paralyzed since the beginning of October.
However, tax season is looming on the horizon – we will have to know what it is quite quickly.
What does this measure consist of?
Remember that this increase, presented in the 2024 budget of Justin Trudeau’s government, would increase the capital gains inclusion rate from 50% to 66.67% beyond the first $250,000 for individuals.
The gains concerned are those which were made from June 25, 2024. Those which come from the sale of a main residence are excluded from this measure.
In other words, individuals who declare such a capital gain will have to include 50% of the first $250,000 and 66.67% of the excess in their taxable gains.
A person who has, for example, $500,000 of capital gains to declare will be taxed on $291,675 rather than on $250,000.
According to data from the Chair in Taxation and Public Finance (CFFP), this would be a very small number of Canadians. If the measure had been in force during the decade 2012-2021, only 1.1% of people would have been affected.
Read the article “A sketch of these taxpayers who make gains of $250,000 or more”
So, what do we do about taxes?
According to the most recent verifications carried out by The Press From government sources, it seems that the watchword for the moment is to apply these changes and therefore to use the inclusion rate of 66.67% on the bracket above $250,000.
When tax proposals are filed in a notice of ways and means, as was done in this case, the usual practice is that they are considered in force in the planning, even if there are still procedures to be completed.
The forms that will be published by the Canada Revenue Agency (CRA) by January 31, 2025 should therefore take this reform into account, a government source confirmed to The Press Friday.
As the situation in Parliament is atypical, here is what could happen in various scenarios, still according to our most recent information:
- If Parliament were dissolved and elections were declared, the ARC would likely continue to act as if reform was going to be implemented.
- If Parliament were dissolved following a vote on a motion of no confidence directly related to the proposed measure, the CRA would cease to apply it.
- If, when parliamentary proceedings resume, no bill is adopted in the House of Commons and the government indicates its intention not to pursue the proposed measure, the CRA would cease to apply it.
Other tax specialists consulted in recent weeks also mentioned that an unwritten rule is that even during a change of government, the new administration respects the tax measures announced by a previous government so as not to create uncertainty. , even if it means limiting the application time.
In summary, we will have to wait in the coming weeks to find out for sure, but everything indicates at the moment that the CRA plans to administer the increase in the inclusion rate.
