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Ottawa Announces Plan to Increase Inclusion Rate on Capital Gains Taxes in 2024 Budget

The federal government has revealed its intention to raise the inclusion rate on capital gains taxes for corporations and individuals, affecting wealthy individuals and aiming to address tax advantages not available to middle-class Canadians. The changes, announced in the Budget 2024, are expected to generate $21.9 billion in revenue over five years.

Quick Facts

• The budget proposes to increase the inclusion rate on capital gains realized annually above $250,000 by individuals and on all capital gains realized by corporations and trusts from one-half to two-thirds.
• New changes to Canada’s tax system are expected to generate $21.9 billion in revenue over five years.
• Around 12 per cent of Canadian companies would be subject to the higher inclusion rate, while around 0.13 per cent of Canadians with average incomes of $1.42 million are believed to see their personal income tax on capital gains rise due to the proposed amendment.

The Budget 2024 outlines the government’s plan to increase the inclusion rate on capital gains realized annually above $250,000 by individuals and on all capital gains realized by corporations and trusts from one-half to two-thirds, effective June 25, 2024. However, the inclusion rate for capital gains realized annually up to $250,000 by individuals will continue to be one-half.

The Department of Finance highlighted that only 0.01 per cent of those under 30 are anticipated to have capital gains income over the $250,000 threshold in 2025. The federal government asserts that discrepancies between taxes on income earned from wages, capital gains, and dividends favor wealthy individuals. It also pointed out that Canada’s position among its peers regarding capital gains tax benefits is more pronounced than any other country in the G7.

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