Axe the Capital Gains Tax Increase?

Understanding the Proposed Capital Gains Tax Hike and Its Implications for Homeowners

In April 2024, the Canadian government proposed increasing the capital gains inclusion rate from 50% to 66.7% for individuals with gains exceeding $250,000. This meant that a larger portion of capital gains would be taxable, potentially affecting investors and homeowners alike. ​

Impact on Homeowners

It's important to note that in Canada, the sale of a primary residence is exempt from capital gains tax. Therefore, homeowners selling their main homes would not be directly affected by this proposed increase. ​

However, those selling secondary properties, such as cottages or investment properties, could face higher taxes on the profits from these sales if the inclusion rate were increased. For instance, a long-held family cottage that has appreciated significantly in value could result in substantial capital gains, thereby increasing the taxable amount under the proposed changes.​

Recent Developments

In late January 2025, the federal government announced a deferral of the implementation of the increased inclusion rate to January 1, 2026. This decision aimed to provide clarity and stability during a period of economic uncertainty. 

Subsequently, both major political figures, Mark Carney and Pierre Poilievre, expressed opposition to the hike. Carney, upon his election as Liberal Party leader and Prime Minister in March 2025, stated that his government would "immediately" scrap the change to encourage investment and reward risk-taking. ​

Conclusion

While the proposed increase in the capital gains inclusion rate has been deferred and faces significant political opposition, it's crucial for homeowners, especially those with secondary properties, to stay informed about potential tax changes. Consulting with tax professionals can provide personalized guidance on how such changes might impact individual financial situations.​

​For the latest updates on capital gains tax policies and their implications for homeowners, continue to follow our Brookswood Development Info site.