Capital gains inclusion rate increase postponed until 2026

The Department of Finance has postponed the increase to the capital gains inclusion rate, originally set for June 25, 2024, to January 1, 2026. This change impacts individuals, corporations, and most trusts.

Key Highlights:

• Current Inclusion Rate: The 50% inclusion rate remains until January 1, 2026.

• Future Increase: Starting January 1, 2026, the inclusion rate will rise to 66.67% for individuals with capital gains over $250,000, and for all capital gains realized by corporations and most trusts.
  

Exemptions and Incentives:

• Principal Residence Exemption: No tax on capital gains from selling your principal residence.

• $250,000 Annual Threshold: Individuals can continue with the 50% inclusion rate on the first $250,000 of annual capital gains starting January 1, 2026.

• Lifetime Capital Gains Exemption: The exemption limit will increase to $1.25 million (from $1,016,836) for qualified small business shares, farming, and fishing property sales, effective June 25, 2024.

• Canadian Entrepreneurs’ Incentive: From 2025, this new incentive reduces the inclusion rate to 33.33% on up to $2 million of eligible capital gains, with the cap increasing annually.
  

Tax Planning Implications: This deferral offers time to plan for these changes. Individuals and businesses should review their investment strategies and consult a tax professional to assess impacts on their financial plans.