Last week, federal Finance Minister Dominic LeBlanc announced that the federal government is deferring the increase to the capital gains inclusion rate until January 1, 2026.  The Langley Chamber had advocated directly to the Minister and in media about the negative impacts of the capital gains increase, particularly around encouraging investment, entrepreneurship and business growth.   Read our letter > 

With this announcement, the CRA is reverting back to a capital gains inclusion rate of 50% for capital gains realized in 2024 and 2025.  This removes some of the confusion around the capital gains rate for this tax year.  Given leading Liberal leadership candidates, and the federal Conservative Party, have all promised to cancel the capital gains increase, more changes are likely. 

Three other improvements to the capital gains rules are proceeding, including:

Increasing the Lifetime Capital Gains Exemption to $1.25 million
Effective June 25, 2024, from the current amount of $1,016,836 on the sale of small business shares and farming and fishing property. With this increase, Canadians with eligible capital gains below $2.25 million would pay less tax and be better off, even after the inclusion rate increases on January 1, 2026.

A new Canadian Entrepreneurs’ Incentive
To encourage entrepreneurship by reducing the inclusion rate to one-third on a lifetime maximum of $2 million in eligible capital gains. This incentive would take effect starting in the 2025 tax year and the maximum would increase by $400,000 each year, reaching $2 million in 2029. Combined with the new $1.25 million lifetime capital gains exemption, when this incentive is fully rolled out, entrepreneurs would pay less tax and be better off on capital gains of up to $6.25 million.

A new Annual Threshold
A new $250,000 annual threshold will be introduced on January 1, 2026, allowing individuals to benefit from the 50% inclusion rate on capital gains up to this amount.  However, no such exemption applies for corporations and therefore ALL capital gains realized on or after January 1, 2026 will be subject to 2/3 inclusion rate.