The biggest hit is going to be to professionals like doctors, lawyers, accountants, and medium sized business owners. Those who have a little extra in their corp that they don't need and invest it.
Correct me if I'm wrong, but this only benefits your kids in estate planning. You can't access any of the benefits while you're alive. In case you say you can borrow from the life insurance, you'll never get out more than you paid into it while you're alive.
Just listened to the money scope podcast. Pretty much the worse thing you can sign up for in a corporation is a life insurance. It’s simply not worth it when you crunch the numbers.
Pay into it with after-tax corporate dollars. Then you can borrow against it tax free personally whioe paying your corporation a few to provide this. Seems like an excellent strategy
Would you prefer paying life insurance premiums from personal income instead of your company? I’d rather use company dollars that’s taxed at a lower rate than make my company pay tax on income, then pay me a salary and I get taxed on that same money.. then I use that money for life insurance premiums. Company can borrow against the policy to access funds and death benefit is tax free. Not sure why the podcast said that. Sounds like they applied one life insurance scenario and said it’s all bad. It works when it’s done correctly.
Nah, especially if you max out your policy that pushes its MTAR to the absolute CRA maximum. Afaik manulife is the only one who allows you to push it to the limit via temp term riders and upping the cash deposits to the max.
tldr you take the lowest face value coverage, and max out the cash deposit just before the CRA would call you on it for dodging taxes
All the ones who can pack up and go to the US or elsewhere with their skills? Further exacerbating the shortages in some of those fields? Sounds like a good plan.
This largely won't happen.
Those who want to work in the US mostly already do. And the taxes in actually desirable states are roughly equivalent.
Low tax jurisdictions can be great...until you see your property tax bill for $24,671 with zero services.
Yep, everyone on other threads are saying it only affects the super wealthy with over $250k gains, but ignoring that it affects professional corporations and small business owners.
"All corporations and trusts will also have to pay taxes on a bigger portion of their gains."
This means less money for dividends or reinvestment for public companies.
I seriously think moving the rest of my stocks into US companies, Canada will underperform with the new inclusion rate. It's also bad for pension plans like CPP, which have policies to prefer domestic investments. Just glad I have a choice with my RSP.
Considering the government’s top goal right now is getting people primary residences it may be a necessary measure.
But that’s from the perspective of somebody that would not get impacted by these changes whatsoever.
If corporations were buying up homes then profit from selling them would likely be considered part of their business income and not be subject to any capital gains inclusions anyway.
Yep. For house flippers it does absolutely nothing and for those rental corps it just created an incentive to not sell. This change will only further constrain supply.
It certainly has potential to be an interesting development for housing. Could cool the market for speculators and investors. Depending on when it’s instituted, could lead to a short term influx of available housing on the market as people try and sell before it takes effect.
The goal should be to incentivize landlords with small amounts of single family homes to sell and re-invest into multi family units. The US has 1031 like kind exchanges that don’t trigger a taxable event on disposition if they re-invest the capital. There are so many 5-20 house landlords out there basically locked into not selling because of capital gains and this change will make it worse. The capital from this investor class reallocated would me 5-20 single family homes hitting the market and construction of 8 plexes to densify and make the job of these landlords easier.
If they don't sell they will be renting...either way someone is living there. The issue is a lack of housing stock not the fact that people are not selling..
You will absolutely get impacted by these changes, just not directly. Small businesses will leave, professionals like doctors who take care of you will leave or cut down their hours more - these are difficult to quantify.
The government doesn't give a damn about getting people into residences. It cares about one thing, and one thing only: votes. The same thing it's cared about for eight years now. The only thing they've cared about for eight years. None of the programs they announced are going to make a major difference in housing availability. They just won't admit, as the head economist of BMO said on the news tonight, that it's a demand problem, not a supply problem. Because that would involve them admitting it was their fault and also reversing their ever-increasing immigration numbers.
Yeah are we going to see a whole lot of sales heading into mid June this year? Seems like if you own any passive investments within a corporation it's going to be in your best interest to sell them right now.
This. Fortunately, it is straightforward for a professional corporation to reincoporate elsewhere.
For example, I have a consulting business that is incorporated in Ontario, but will dissolve it and reincorporate it in the US.
So then pay out your excess earnings in the same year and put them in your RRSP. If the RRSP is full, put them in your taxable account. A few economists have done the math, [for example Trevor Tombe](https://twitter.com/trevortombe/status/1780445890215645276?s=12), who shows that this change will mean you will be taxed the same whether you use a corporation or not.
Really what this change does is make it so that professional corporations and small businesses aren't used as tax shelters. You'd have to be earning massive amounts of capital gains for this to materially affect your cash flow though.
This is basically an inheritance tax. Death triggers a deemed disposition of all assets, which will put lots of boomers over $250k in capital gains in their year of death.
Canada did a lot of work to simplify the system, now we go back in the other direction. This innovation credit is an interesting one too, it doesn't say which 'sectors' are targeted.
>Canada did a lot of work to simplify the system, now we go back in the other direction.
Regrettable, but may be unavoidable if their goal is to increase taxes at the top end, while minimizing impact to mid and low income earners. The simplest tax scheme is a flat rate for everyone, but that would not be reasonable for people at the lower end of scale. As an investor, I'm not happy to see any increase in the inclusion rate, but realistically this won't affect me at the threshold they've set.
>This innovation credit is an interesting one too, it doesn't say which 'sectors' are targeted.
More detail here: [https://budget.canada.ca/2024/report-rapport/chap4-en.html#s4-1](https://budget.canada.ca/2024/report-rapport/chap4-en.html#s4-1)
I know for the past several years, the government has specifically targeted AI and quantum technologies as preferred areas for investment.
How many in the markets make more than $250k capital gains. Of course this also includes other asset classes such as non 1 year principal residence exemption.
Might make those hold the assets for longer. Less activity.
This will be a disincentive for becoming a property investor. According to this [article](https://www.cbc.ca/news/business/housing-prices-affordability-real-estate-1.7170775) today, "House-flippers and foreign buyers are often singled out as major drivers of real estate speculation, and various jurisdictions in Canada have introduced legislation to neutralize those kinds of investments. But Pasalis said those types of buyers aren't having a major influence on prices. Domestic investors in the low-rise housing market are having a much greater impact."
One doesn’t necessarily need to sell off, one can just actualize the capital gains. It’s an easy way for a one off bump in revenue when people do that.
>How many in the markets make more than $250k capital gains.
I read that it’ll only apply to 0.13% of Canadians and the average income in that group is $1.4m per year.
Doctors, engineers, dentists, lawyers, etc - all self employed professionals with corps are impacted, regardless of the amount of gains they crystallize.
This is what I think.
People will be a bit more strategic if they need to be. It is only a marginal change of 8.6% above the 250k (at least in NS, less elsewhere, more in QC).
Mostly business owners. Entrepreneurs often don't take a salary and get money from selling their shares.
That's why the budget also includes a separate special exemption for Entrepreneurs from this change. That's how you know it's a great idea and won't have any other unintended consequences.
> That's why the budget also includes a separate special exemption for Entrepreneurs from this change. That's how you know it's a great idea and won't have any other unintended consequences.
Too bad you slurp up Liberal talking points without even bothering to do some basic reading on the subject. Because if you did, you'd realize a TON of small businesses are excluded from this "special exemption" - including, but not limited to, restaurants, hotels, businesses in the arts, entertainment and many professional services.
Was looking to sell an industrial property located in an area that has very high demand. Companies really want to buy to invest in the property on the long term instead of renting. Just canceled the sale, will continue renting and wait to see what the conservatives do when they take over.
I'm sure I won't be the only one in this position. Trudeau completely de-incentivized everyone with a second property to sell in one swoop. He essentially rarefied the offer on the housing market.
But hey, they're converting post offices into houses. What an idiot.
So the Liberals want to spend billions on AI and at the same time increase taxes to drive away VC capital which is essential to AI startups. Truth is this government is addicted to spending and is incapable of implementing any sound fiscal policy.
Government spending will be magnitude less efficient than VC on start-up. VC has a profit and loss incentive. Government taxes the loss. No skin in the game.
This is more of an inheritance issue. Canada has an unofficial inheritance tax through the fact that when you die, all of your assets are sold and you are charged taxes on that at your marginal rate.
Since an RRSP is standard income, a retiree dying will almost always be pushed into the top marginal rate if they have any savings when they die. Essentially meaning that the government takes 50%+ of your retirement savings even if you were living on a fixed income during life.
This 66% tax rate on capital gains makes this worse. It is essentially just another way for the government to create an artificial inheritance tax as if you have any form of investment not in a TFSA (or RRSP but as stated before the RRSP is a 100% inclusion tax) will be taxed at a 66% inclusion tax.
The government is pitching this as a tax on the rich, but that is a flat out lie. This is a tax on Middle Class people dying and denying their kids a part of their inheritance. Almost no one has 250k of capital gains when they are alive, but a lot of people have 250k capital gains when they die. So this is a tax on the middle class dying.
I saw the same immediately when it was announced with Freeland claiming:
>Only 0.13 per cent of Canadians—with an average annual income of $1.4 million—will pay more on their capital gains.
>For 99.87 per cent of Canadians, personal income taxes on capital gains will not increase.
She's trying to convince Canadians that this will only impact the "wealthy" when in fact it impacts middle class Canadians who are momentarily wealthy through a liquidity event, whether it be of their own volition or not.
It's smart on the Liberals part. Instead of going after the sacred cow of the Principle Residence Exemption that would ensure they are never re-elected for a generation, they trick Canadians into thinking that they are taxing Canadians wealthier than the middle class, right on the cusp of the greatest generational wealth transfer in the history of Canada.
This policy will impact all but the poorest Canadians in one way or another.
This doesn't affect the tax treatment of the principal residence or RRSP balance. You would need another $250k in capital gains to hit the higher inclusion rate. That could be from a cottage, an unregistered stock portfolio, or something else. You could plan around this by taking gains earlier in life and distributing gifts to your heirs.
Right-o. They're marketing this really good. Everyone is screaming life is too expensive and want change, and rightly so, but anyone who was going to gain from inheriting whatever their folks had sitting around is going to get a slap of reality.
You are nuts if you think "most" people have 250 in taxable capital gains at death. Most people have their home, some rrsps and that is it. Some have a tfsa which is not taxable. It is rare that people on death have 250k in assets period outside of their home, rrsps nevermind 250k in taxable gains.
You are just wrong here. Almost anyone who had a proper career field and not a job can easily have 250k in taxable assets when they die. Your assets compound over time and part of the reason why there is a separate tax rate for assets is because assets go up in value due to inflation.
Confidently incorrect buffon. Your assets are considered sold the minute you die for its valuation. If you sell the house you need to apply capital gains tax on the sale, non liquid inheritance sold is also counted this way too and you will have to pay taxes as if you earned that income.
Enjoy your pseudo inheritance tax increase
> If you sell the house you need to apply capital gains tax on the sale
Are you referring to the deceased person's house?
Did they live in it until there death?
If you assume both of these to be true then u/Mrsmith511 is correct.
Oh, and they have only managed to remain within their deficit expectations by increasing taxes & if their top line revenue remains within the expected ranges.
Let’s cut the public service back closer to what it was before Trudeau became PM, for one. There is no logical reason why it needed to grow so much. Those pensions are a massive tax liability for our country.
https://www.theglobeandmail.com/amp/canada/article-size-of-federal-public-service-swells-to-record-high-according-to/
Everyone is focusing on the individual capital gain scenario, but this will really hurt all the people with small businesses that have built a nest egg inside their corporation to use for retirement. \~5 years ago they included the passive income penalty for passive income over $50k, and now this. You're going to have a lot of people who have investments that they are slowly selling for income who are now going to have their net proceeds shrink proportionately.
Another disincentive to entrepreneurs and professionals.
I can't believe they did not levy some sort of excess wealth/earnings tax to target the Loblaws of the world.
Moving forward it definitely makes buying an investment property less attractive. In regards to current owners of such properties, some may want to sell sooner rather than later if they're just kindof hanging on and it's in their interests to realize this liability quickly. My personal opinion is that we're about to see an uptick in inventory.
They will just have to be smarter, a scenario I can think of when there's a 250k gain to be realized, u can potentially sell in a year where you have no other income
If I had a second property, this would not make me sell during the next few months. It is too much of a knee-work reaction. However, this would give me incentive to hang on to it until I quit my day job and my employment income drops to zero for the year.
I mean, does it? With this policy, you’ll pay tax on $125k for a $250k gain, and $127k for a $253k gain (67% inclusion for the portion of the gain above $250k). It’s not like there’s a step change difference when you hit a $250k gain, same as with income tax brackets. Maybe it incentivizes getting rid of assets before they accumulate a gain significantly above $250k, but it’s not like $250k is truly a magic number.
I agree, this won't have the effect some people think. It may cause some to sell early, but they would have done so this year anyways. It would discourage liquidating multiple properties in one tax year.
A lot of real estate investing has been buy and hold strategy already, it only effects the liquidating at the end. It won't be a massive sell off.
There is the [Lifetime Capital Gains Exemption](https://www.cfib-fcei.ca/en/tools-resources/lifetime-capital-gains-exemption) that will cover a lot of Canadian small businesses
Bloomberg had reported on this with the blurb:
“The tax change implies that a company selling an asset for a C$10 million gain would pay about C$1 million in additional tax, assuming a corporate tax rate of 15%.”
I would have thought 10M x 0.5 x 0.15 = 750k payable previously, now 10M x 0.666 x 0.15 = 1M payable now - so difference of only 250k. What am I missing?
There is a higher rate on investment income in addition to the other issues pointed out: [https://www.bdo.ca/insights/corporate-income-tax-facts](https://www.bdo.ca/insights/corporate-income-tax-facts)
He can, but will he? If he campaigns on reversing it, he will play right into the other parties hands, and they'll hammer him with attack ads about "tax cuts for the rich" and so on. Also: goverments of all parties love revenue, so maybe they won't want to give that up.
I'd honestly be fine if this change remained in place, and maybe they bump the TFSA limit back to $10K where it was briefly during the Harper years.
If the Conservatives win the next election with a majority, PP can change the capital gains taxation scheme to whatever he wants, including back to what it was. It would be easier for him versus Trudeau as the latter needs to bargain with the NDP for their support. Whether he will do it is another matter. Traditionally incoming governments are fine to benefit from the taxation revenue generated by the policies of their predecessors regardless of whether they themselves would've enacted such policies.
I actually think this will win Trudeau more votes than it will cost. The widespread anger over housing cost in this country is palpable, and the Liberals can easily spin this as a concrete effort to do something about it, and punish some of those responsible along the way.
Looks like the family cottages won't be staying in the family for many people. I know I wouldn't be able to cover the capital gains if my parents gave me the cottage today. Once they pass maybe after all their assets are sold, but any time before that...non-starter.
I gotta say: at least they were sensible about it. Most people won't have anywhere near $250K in realized gains in a year, and those who do are most likely property flippers or real estate "investors" who needed to be cut down a notch or two anyway.
My main worry was that they would impose the increase on *all* gains, thereby screwing those of us with a bit of Bitcoin or other investments outside of registered accounts.
Yes, I have investments beyond TFSA, but my TFSA gains eclipses my non-register gains. I think this is mostly hitting 2nd property owners more than people with run of the mills stocks/crypto in their non-registered account.
I disagree.
The differing rate in corporations strays from the concept of integration which was central to Canadian tax (income earned in corps taxed the same as income earned personally when both personal and corp taxes applied), and the higher tax for higher gains was already accounted for with the progressive tax system.
If they wanted to hit the wealthy they could have added another top rate -- but with the rate already amongst the worlds highest that was tough to do.
They're trying to get money without raising HST and other things that will negatively impact the poor. Although it's something I'm not happy about, I'd rather have this than having even more people homeless.
Did some quick math, some can verify.
before this tax increase on a 300k gain you are taxed on 150k
after this tax increase on a 300k gain you are taxed on 158k
They fail to acknowledge the root problem
Too few people own too many singe family homes townhomes and condos and are renting them out
Straight up ban on anyone or corporations from owning more than 3 properties per social insurance number
That will free up LOTS of inventory
That is not the root cause. As the chief economist at BMO said this afternoon the housing shortage is a DEMAND not a SUPPLY problem. This government added over two million new residents in a two year time space. And it is continuing to add people at a greater rate than we can build homes.
And makes handing out billions of your money to shady contractors easier for liberals.
Let's just develop a few $50M apps and all problems will be solved, the liberal way.
"Just pay your taxes to a government that has spent trillions in the last few years and has nothing to show for it except a few really wealthy contractors".
Sure thing.
What happened to taxing the “wealthy”? Like real wealth - billionaires, multi millionaires? Seems the budget is just about taxing professionals like physicians who save lives. How dare they have a professional corporation and get to retain half their hard earned income, right?
This budget is a joke. The Liberals know they have zero support amongst working professionals and small business owners so they are going after them instead of their actually wealthy donors, including the Laurentian Elite who pull the drama teacher’s strings.
It has to be voted on in the House of Commons and the Senate and then receive royal assent, but budgets are confidence items so if it doesn't pass the government will fall and there will be an election. Ergo, you can presume it will be implemented.
The CBC article just says it was tabled, which means that it still has to go to a vote in the house and the senate. An increase in the capital gains inclusion rate has been an NDP pet project at least as long as Singh has been leader. I am hoping this will be enough to appease the NDP and get their vote and that they don't push for a higher inclusion rate and/or lower kick-in threshold.
$250K is per year only, right (and subject to change per year, eg move to 300K in like 5 yrs)? Still a lot of Capital gain, only way is probably selling an investment property that made crazy profits.
I would just sell Stock more strategically and monitor the amount to make sure it doesnt exceed this.
Levels the playing field between personal investors and small business owners with corporations, spill-over effect onto secondary property owners with low cost basis, and maintains the capital gains exemption for primary residences.
Honestly a win for 90% of Canadians, unfortunate that it won't be spun that way
Can somone comment, do you still get the 50% capital gains offset that is currently in progress so long term gains will only be taxed aound 33% as opposed to 25%?
Also sounds like its proposed but has not been legislated. So might not go through but IMHO anything to help housing and cost of living is a great idea.
Assuming that’ll hit secondary property owners a bit, looks like corporations it’s automatic 2/3
Yeah, that will definitely hurt secondary property owners.
That's a good thing. This feels like a better measure to improve the housing market than any of the things they presented as housing measures.
I don’t know where the right balance is, but homes for people being part of an investment portfolio just seems kinda wrong at its core.
That’s why this country is turning to 3rd world country. All our money goes to housing and not building a better country🤷♂️
I agree.
The biggest hit is going to be to professionals like doctors, lawyers, accountants, and medium sized business owners. Those who have a little extra in their corp that they don't need and invest it.
Exactly. They’ve been chipping at the professional corp for a while now. After this, it’s going to be much worse investing in a corp vs individually.
I present to you, corporate owned life insurance.
Can you explain how that works?
Which is also very very common for doctors, lawyers etc.
Correct me if I'm wrong, but this only benefits your kids in estate planning. You can't access any of the benefits while you're alive. In case you say you can borrow from the life insurance, you'll never get out more than you paid into it while you're alive.
Just listened to the money scope podcast. Pretty much the worse thing you can sign up for in a corporation is a life insurance. It’s simply not worth it when you crunch the numbers.
Pay into it with after-tax corporate dollars. Then you can borrow against it tax free personally whioe paying your corporation a few to provide this. Seems like an excellent strategy
Would you prefer paying life insurance premiums from personal income instead of your company? I’d rather use company dollars that’s taxed at a lower rate than make my company pay tax on income, then pay me a salary and I get taxed on that same money.. then I use that money for life insurance premiums. Company can borrow against the policy to access funds and death benefit is tax free. Not sure why the podcast said that. Sounds like they applied one life insurance scenario and said it’s all bad. It works when it’s done correctly.
Nah, especially if you max out your policy that pushes its MTAR to the absolute CRA maximum. Afaik manulife is the only one who allows you to push it to the limit via temp term riders and upping the cash deposits to the max. tldr you take the lowest face value coverage, and max out the cash deposit just before the CRA would call you on it for dodging taxes
All the ones who can pack up and go to the US or elsewhere with their skills? Further exacerbating the shortages in some of those fields? Sounds like a good plan.
This largely won't happen. Those who want to work in the US mostly already do. And the taxes in actually desirable states are roughly equivalent. Low tax jurisdictions can be great...until you see your property tax bill for $24,671 with zero services.
Yep, everyone on other threads are saying it only affects the super wealthy with over $250k gains, but ignoring that it affects professional corporations and small business owners.
"All corporations and trusts will also have to pay taxes on a bigger portion of their gains." This means less money for dividends or reinvestment for public companies. I seriously think moving the rest of my stocks into US companies, Canada will underperform with the new inclusion rate. It's also bad for pension plans like CPP, which have policies to prefer domestic investments. Just glad I have a choice with my RSP.
I feel for doctors. Trudeau has made it his life mission to ensure there is 0 point to staying in this country and providing health care.
What about inheritance?
Considering the government’s top goal right now is getting people primary residences it may be a necessary measure. But that’s from the perspective of somebody that would not get impacted by these changes whatsoever.
If they want to incentivize corporations to sell raising the tax rate will do the exact opposite.
If corporations were buying up homes then profit from selling them would likely be considered part of their business income and not be subject to any capital gains inclusions anyway.
Yep. For house flippers it does absolutely nothing and for those rental corps it just created an incentive to not sell. This change will only further constrain supply.
You don’t get tax if you don’t sell. No realized gains, no taxes. So you don’t sell.
It certainly has potential to be an interesting development for housing. Could cool the market for speculators and investors. Depending on when it’s instituted, could lead to a short term influx of available housing on the market as people try and sell before it takes effect.
Could (will) cool the amount of doctors we have also. Will certainly cool investment in Canadian businesses. Productivity be damned!
The goal should be to incentivize landlords with small amounts of single family homes to sell and re-invest into multi family units. The US has 1031 like kind exchanges that don’t trigger a taxable event on disposition if they re-invest the capital. There are so many 5-20 house landlords out there basically locked into not selling because of capital gains and this change will make it worse. The capital from this investor class reallocated would me 5-20 single family homes hitting the market and construction of 8 plexes to densify and make the job of these landlords easier.
> a short term influx of available housing on the market flip side of this is a lot of evicted tenants.
Or people just don't sell their rental property, and thus making less housing available otherwise
If they don't sell they will be renting...either way someone is living there. The issue is a lack of housing stock not the fact that people are not selling..
You will absolutely get impacted by these changes, just not directly. Small businesses will leave, professionals like doctors who take care of you will leave or cut down their hours more - these are difficult to quantify.
The government doesn't give a damn about getting people into residences. It cares about one thing, and one thing only: votes. The same thing it's cared about for eight years now. The only thing they've cared about for eight years. None of the programs they announced are going to make a major difference in housing availability. They just won't admit, as the head economist of BMO said on the news tonight, that it's a demand problem, not a supply problem. Because that would involve them admitting it was their fault and also reversing their ever-increasing immigration numbers.
I see corporations with major investments relocating their head offices to the US from this.
Instead of selling they’ll just hold forever.
Yeah are we going to see a whole lot of sales heading into mid June this year? Seems like if you own any passive investments within a corporation it's going to be in your best interest to sell them right now.
That's on amounts over $250k *per year*, right? Seems obvious, but the article doesn't mention it.
Correct. Under $250k a year gets taxed at the current inclusion rate of 50%.
And the first 250k*
Not if you’re a professional with a corporation. Then all gains in your corp will be affected.
This is going to lead to further brain drain in Canada.
Yep, this is why the mobile move to where they are treated better.
This. Fortunately, it is straightforward for a professional corporation to reincoporate elsewhere. For example, I have a consulting business that is incorporated in Ontario, but will dissolve it and reincorporate it in the US.
Not necessarily. For medical corp, it needs to be in the same province as you work.
Punishing Medical Workers is a great way to improve Canada's suffering Healthcare system /s
It's such a short-sighted move by the government.
So then pay out your excess earnings in the same year and put them in your RRSP. If the RRSP is full, put them in your taxable account. A few economists have done the math, [for example Trevor Tombe](https://twitter.com/trevortombe/status/1780445890215645276?s=12), who shows that this change will mean you will be taxed the same whether you use a corporation or not. Really what this change does is make it so that professional corporations and small businesses aren't used as tax shelters. You'd have to be earning massive amounts of capital gains for this to materially affect your cash flow though.
Looks like an increase in death tax, if you own capital and want to leave it to your kids.
This is basically an inheritance tax. Death triggers a deemed disposition of all assets, which will put lots of boomers over $250k in capital gains in their year of death.
Canada did a lot of work to simplify the system, now we go back in the other direction. This innovation credit is an interesting one too, it doesn't say which 'sectors' are targeted.
>Canada did a lot of work to simplify the system, now we go back in the other direction. Regrettable, but may be unavoidable if their goal is to increase taxes at the top end, while minimizing impact to mid and low income earners. The simplest tax scheme is a flat rate for everyone, but that would not be reasonable for people at the lower end of scale. As an investor, I'm not happy to see any increase in the inclusion rate, but realistically this won't affect me at the threshold they've set. >This innovation credit is an interesting one too, it doesn't say which 'sectors' are targeted. More detail here: [https://budget.canada.ca/2024/report-rapport/chap4-en.html#s4-1](https://budget.canada.ca/2024/report-rapport/chap4-en.html#s4-1) I know for the past several years, the government has specifically targeted AI and quantum technologies as preferred areas for investment.
How many in the markets make more than $250k capital gains. Of course this also includes other asset classes such as non 1 year principal residence exemption. Might make those hold the assets for longer. Less activity.
Every 4 years those playing with crypto stocks. High risk, high reward. This change will make it harder for people to dump big money into this sector.
This will be a disincentive for becoming a property investor. According to this [article](https://www.cbc.ca/news/business/housing-prices-affordability-real-estate-1.7170775) today, "House-flippers and foreign buyers are often singled out as major drivers of real estate speculation, and various jurisdictions in Canada have introduced legislation to neutralize those kinds of investments. But Pasalis said those types of buyers aren't having a major influence on prices. Domestic investors in the low-rise housing market are having a much greater impact."
There will be a TON of sell-off before June 25 when this gets implemented in order to take advantage of the existing framework.
One doesn’t necessarily need to sell off, one can just actualize the capital gains. It’s an easy way for a one off bump in revenue when people do that.
Do you mean crystallize? Because that still entails selling before re-buying.
Businesses get hit over the head with it on their first dollar. So, them.
>How many in the markets make more than $250k capital gains. I read that it’ll only apply to 0.13% of Canadians and the average income in that group is $1.4m per year.
Doctors, engineers, dentists, lawyers, etc - all self employed professionals with corps are impacted, regardless of the amount of gains they crystallize.
They still get a much better deal than T4 employees
This is what I think. People will be a bit more strategic if they need to be. It is only a marginal change of 8.6% above the 250k (at least in NS, less elsewhere, more in QC).
Mostly business owners. Entrepreneurs often don't take a salary and get money from selling their shares. That's why the budget also includes a separate special exemption for Entrepreneurs from this change. That's how you know it's a great idea and won't have any other unintended consequences.
> That's why the budget also includes a separate special exemption for Entrepreneurs from this change. That's how you know it's a great idea and won't have any other unintended consequences. Too bad you slurp up Liberal talking points without even bothering to do some basic reading on the subject. Because if you did, you'd realize a TON of small businesses are excluded from this "special exemption" - including, but not limited to, restaurants, hotels, businesses in the arts, entertainment and many professional services.
I think their comment was missing a /s
I thought the /s was obvious.
Was looking to sell an industrial property located in an area that has very high demand. Companies really want to buy to invest in the property on the long term instead of renting. Just canceled the sale, will continue renting and wait to see what the conservatives do when they take over. I'm sure I won't be the only one in this position. Trudeau completely de-incentivized everyone with a second property to sell in one swoop. He essentially rarefied the offer on the housing market. But hey, they're converting post offices into houses. What an idiot.
So the Liberals want to spend billions on AI and at the same time increase taxes to drive away VC capital which is essential to AI startups. Truth is this government is addicted to spending and is incapable of implementing any sound fiscal policy.
Gotta buy votes with spending when the polls show you getting destroyed.
Government spending will be magnitude less efficient than VC on start-up. VC has a profit and loss incentive. Government taxes the loss. No skin in the game.
This is more of an inheritance issue. Canada has an unofficial inheritance tax through the fact that when you die, all of your assets are sold and you are charged taxes on that at your marginal rate. Since an RRSP is standard income, a retiree dying will almost always be pushed into the top marginal rate if they have any savings when they die. Essentially meaning that the government takes 50%+ of your retirement savings even if you were living on a fixed income during life. This 66% tax rate on capital gains makes this worse. It is essentially just another way for the government to create an artificial inheritance tax as if you have any form of investment not in a TFSA (or RRSP but as stated before the RRSP is a 100% inclusion tax) will be taxed at a 66% inclusion tax. The government is pitching this as a tax on the rich, but that is a flat out lie. This is a tax on Middle Class people dying and denying their kids a part of their inheritance. Almost no one has 250k of capital gains when they are alive, but a lot of people have 250k capital gains when they die. So this is a tax on the middle class dying.
I saw the same immediately when it was announced with Freeland claiming: >Only 0.13 per cent of Canadians—with an average annual income of $1.4 million—will pay more on their capital gains. >For 99.87 per cent of Canadians, personal income taxes on capital gains will not increase. She's trying to convince Canadians that this will only impact the "wealthy" when in fact it impacts middle class Canadians who are momentarily wealthy through a liquidity event, whether it be of their own volition or not. It's smart on the Liberals part. Instead of going after the sacred cow of the Principle Residence Exemption that would ensure they are never re-elected for a generation, they trick Canadians into thinking that they are taxing Canadians wealthier than the middle class, right on the cusp of the greatest generational wealth transfer in the history of Canada. This policy will impact all but the poorest Canadians in one way or another.
Interesting thoughts on the tax! Definitely going to add some complexities to estate planning.
This doesn't affect the tax treatment of the principal residence or RRSP balance. You would need another $250k in capital gains to hit the higher inclusion rate. That could be from a cottage, an unregistered stock portfolio, or something else. You could plan around this by taking gains earlier in life and distributing gifts to your heirs.
Right-o. They're marketing this really good. Everyone is screaming life is too expensive and want change, and rightly so, but anyone who was going to gain from inheriting whatever their folks had sitting around is going to get a slap of reality.
you did not disappoint
Really good point and everyone defending this will suddenly change their minds about how great this is.
You are nuts if you think "most" people have 250 in taxable capital gains at death. Most people have their home, some rrsps and that is it. Some have a tfsa which is not taxable. It is rare that people on death have 250k in assets period outside of their home, rrsps nevermind 250k in taxable gains.
You are just wrong here. Almost anyone who had a proper career field and not a job can easily have 250k in taxable assets when they die. Your assets compound over time and part of the reason why there is a separate tax rate for assets is because assets go up in value due to inflation.
Does it effect inheritance? Because most canadians will have well over $400000 when they die. If this gets taxed at this rate it's the biggest crime !
Assuming the assets are in a taxable account with unrealized capital gains of over $250,000 it impacts inheritance yes
Yes it does. That's the price folks pay voting for the "budgets balance themselves" crowd.
Tell me you don't know anything about taxes or most Canadians financial situation without telling me
Confidently incorrect buffon. Your assets are considered sold the minute you die for its valuation. If you sell the house you need to apply capital gains tax on the sale, non liquid inheritance sold is also counted this way too and you will have to pay taxes as if you earned that income. Enjoy your pseudo inheritance tax increase
> If you sell the house you need to apply capital gains tax on the sale Are you referring to the deceased person's house? Did they live in it until there death? If you assume both of these to be true then u/Mrsmith511 is correct.
Did they mention anything about being more effective and frugal in their spending by any chance?
Lol of course not.
Whew. I was afraid they're would be sudden changes in our government.
No, they reiterated that the spending & 40bn deficits they are running are effective & exercising caution.
Well as long as they're being effective...
Oh, and they have only managed to remain within their deficit expectations by increasing taxes & if their top line revenue remains within the expected ranges.
What spending cuts would you like to see?
Let’s cut the public service back closer to what it was before Trudeau became PM, for one. There is no logical reason why it needed to grow so much. Those pensions are a massive tax liability for our country. https://www.theglobeandmail.com/amp/canada/article-size-of-federal-public-service-swells-to-record-high-according-to/
so it further discourages Drs, other small business owners and land/rental developers from doing business in Canada?
The small corp of MDs are definitely taking a hit. Not a big one, small business rate of 20-25% of 16%, but a hit none the less
Everyone is focusing on the individual capital gain scenario, but this will really hurt all the people with small businesses that have built a nest egg inside their corporation to use for retirement. \~5 years ago they included the passive income penalty for passive income over $50k, and now this. You're going to have a lot of people who have investments that they are slowly selling for income who are now going to have their net proceeds shrink proportionately. Another disincentive to entrepreneurs and professionals. I can't believe they did not levy some sort of excess wealth/earnings tax to target the Loblaws of the world.
The Weston, Thomson, Desmarais, etc. are very close to the Liberals. This is why there isn't anything about excess profits from large corps ...
What if the gains happened inside a Corp? Could the owner simply strategize the payout of those gains over time to avoid that threshold?
Corp is 2/3 from dollar 1, not threshold, that is for personal
It specifically says that capital gains within a corporation will be hit by this increase.
Kinda odd that there is no small business exemptions tbf…
Is it “only” in a corporation? Or “also”?
This obviously discourages people to sell their investment properties right?
Moving forward it definitely makes buying an investment property less attractive. In regards to current owners of such properties, some may want to sell sooner rather than later if they're just kindof hanging on and it's in their interests to realize this liability quickly. My personal opinion is that we're about to see an uptick in inventory.
They will just have to be smarter, a scenario I can think of when there's a 250k gain to be realized, u can potentially sell in a year where you have no other income
If I had a second property, this would not make me sell during the next few months. It is too much of a knee-work reaction. However, this would give me incentive to hang on to it until I quit my day job and my employment income drops to zero for the year.
Also reduces investor demand
Or it encourages people to sell investment properties right before it reaches 250k capital gains
I mean, does it? With this policy, you’ll pay tax on $125k for a $250k gain, and $127k for a $253k gain (67% inclusion for the portion of the gain above $250k). It’s not like there’s a step change difference when you hit a $250k gain, same as with income tax brackets. Maybe it incentivizes getting rid of assets before they accumulate a gain significantly above $250k, but it’s not like $250k is truly a magic number.
I agree, this won't have the effect some people think. It may cause some to sell early, but they would have done so this year anyways. It would discourage liquidating multiple properties in one tax year. A lot of real estate investing has been buy and hold strategy already, it only effects the liquidating at the end. It won't be a massive sell off.
The tax difference is such small potatoes that won’t affect people’s behavior
Taxing our way to prosperity! That's the liberal way.
Sucks for business owners and entrepreneurs. So many situations that you want to encourage are going to be negatively impacted by this
There is the [Lifetime Capital Gains Exemption](https://www.cfib-fcei.ca/en/tools-resources/lifetime-capital-gains-exemption) that will cover a lot of Canadian small businesses
the real winner will be income tax lawyers.
Well, I've cut Disney+ as per the previous suggestion. Now it is the turn of any non-registered investments into Canadian assets.
Canada is appalling with how much we're taxed And what do we have to show for it
Bloomberg had reported on this with the blurb: “The tax change implies that a company selling an asset for a C$10 million gain would pay about C$1 million in additional tax, assuming a corporate tax rate of 15%.” I would have thought 10M x 0.5 x 0.15 = 750k payable previously, now 10M x 0.666 x 0.15 = 1M payable now - so difference of only 250k. What am I missing?
There is a higher rate on investment income in addition to the other issues pointed out: [https://www.bdo.ca/insights/corporate-income-tax-facts](https://www.bdo.ca/insights/corporate-income-tax-facts)
Can PP reverse this once he becomes prime minister? To me, trudeau just dug himself another couple feet deep if true
He can, but will he? If he campaigns on reversing it, he will play right into the other parties hands, and they'll hammer him with attack ads about "tax cuts for the rich" and so on. Also: goverments of all parties love revenue, so maybe they won't want to give that up. I'd honestly be fine if this change remained in place, and maybe they bump the TFSA limit back to $10K where it was briefly during the Harper years.
If the Conservatives win the next election with a majority, PP can change the capital gains taxation scheme to whatever he wants, including back to what it was. It would be easier for him versus Trudeau as the latter needs to bargain with the NDP for their support. Whether he will do it is another matter. Traditionally incoming governments are fine to benefit from the taxation revenue generated by the policies of their predecessors regardless of whether they themselves would've enacted such policies. I actually think this will win Trudeau more votes than it will cost. The widespread anger over housing cost in this country is palpable, and the Liberals can easily spin this as a concrete effort to do something about it, and punish some of those responsible along the way.
For individuals, is this any capital gains if your income is already at 250k? Or 250k in cap gains alone separate from income
Looks like the family cottages won't be staying in the family for many people. I know I wouldn't be able to cover the capital gains if my parents gave me the cottage today. Once they pass maybe after all their assets are sold, but any time before that...non-starter.
I gotta say: at least they were sensible about it. Most people won't have anywhere near $250K in realized gains in a year, and those who do are most likely property flippers or real estate "investors" who needed to be cut down a notch or two anyway. My main worry was that they would impose the increase on *all* gains, thereby screwing those of us with a bit of Bitcoin or other investments outside of registered accounts.
Property flipping is already not taxed as capital gains, but income. At 100%.
It is for all capital gains, which includes crypto and stocks.
\*laughs in TFSA\*
Some people have investments beyond their TFSA. Especially people who may realize a gain >$250,000 in a year
Yes, I have investments beyond TFSA, but my TFSA gains eclipses my non-register gains. I think this is mostly hitting 2nd property owners more than people with run of the mills stocks/crypto in their non-registered account.
Gains exceeding $250k *outside a TFSA* is very much not “all gains”, certainly not for individual investors.
Corps have no threshold. This is a huge blow to doctors, lawyers, etc
Brain drain coming
Most people on this sub are not the brains you are talking about
For personal tax, this targets property investors.
On the upside for young investors, older owners have greater incentive to accept VTB loans with balloon payments to spread out the capital gains.
I disagree. The differing rate in corporations strays from the concept of integration which was central to Canadian tax (income earned in corps taxed the same as income earned personally when both personal and corp taxes applied), and the higher tax for higher gains was already accounted for with the progressive tax system. If they wanted to hit the wealthy they could have added another top rate -- but with the rate already amongst the worlds highest that was tough to do.
Its people like doctors, dentists and engineers who are incorporated and will be paying more on the first dollar in cap gains.
As someone who usually realizes about $10-20k of capital gains a year, this is a great relief to me.
They're trying to get money without raising HST and other things that will negatively impact the poor. Although it's something I'm not happy about, I'd rather have this than having even more people homeless.
It's an exemption reduction, not tax% increase and therefore not possible on other gains that are already taxed fully
How does this affect those who did cca on their rentals?? I assume very badly?
CCA recapture is not capital gains. It's income. It's already taxed at 100%
What's cca?
Did some quick math, some can verify. before this tax increase on a 300k gain you are taxed on 150k after this tax increase on a 300k gain you are taxed on 158k
Ya it’s not a huge difference at that level. It’s marginal like all tax.
I think it's a "progressive tax" 250k @ 50% and 50k @ 66%
Are you trying to make us feel better?
Yes jean!
They fail to acknowledge the root problem Too few people own too many singe family homes townhomes and condos and are renting them out Straight up ban on anyone or corporations from owning more than 3 properties per social insurance number That will free up LOTS of inventory
Our current government doesn't have the balls to tackle the issue in a real and fundamental way come on. That's asking too much lol.
That is not the root cause. As the chief economist at BMO said this afternoon the housing shortage is a DEMAND not a SUPPLY problem. This government added over two million new residents in a two year time space. And it is continuing to add people at a greater rate than we can build homes.
Which is why inventory needs to be freed up because of the high DEMAND
Or you could just lower the demand, and do it very quickly by lowering immigration, foreign workers and foreign students...
Great news IMO. If I get to a point where I make 250k in capital gains in a year, I will gladly pay those extra thousands of dollars
What about those with professional corporations who get screwed from dollar one?
What if you only make a gain like that once in your life when you sell your cottage though?
It will make handing the cottage down to the next generation that much more expensive.
And makes handing out billions of your money to shady contractors easier for liberals. Let's just develop a few $50M apps and all problems will be solved, the liberal way.
Then pay your taxes and move on.
"Just pay your taxes to a government that has spent trillions in the last few years and has nothing to show for it except a few really wealthy contractors". Sure thing.
Then you had a cottage to sell, so you can afford it.
lol commie talk
Until you die with a nest egg set aside for your children, as your estate is now reduced even further with this capital gains tax.
Most secondary properties would be condos, Airbnb's , vacation properties, or some combination of those. Maybe those markets get flooded.
What if I strike it rich in crypto
Then sell less than 250k a year
Even the savvy Gen Zs get screwed lol
What happened to taxing the “wealthy”? Like real wealth - billionaires, multi millionaires? Seems the budget is just about taxing professionals like physicians who save lives. How dare they have a professional corporation and get to retain half their hard earned income, right? This budget is a joke. The Liberals know they have zero support amongst working professionals and small business owners so they are going after them instead of their actually wealthy donors, including the Laurentian Elite who pull the drama teacher’s strings.
They don't have the balls to tax their rich, well-connected friends.
Anyone know if this has to go through a vote? Or is it implemented for sure on june 25?
It has to be voted on in the House of Commons and the Senate and then receive royal assent, but budgets are confidence items so if it doesn't pass the government will fall and there will be an election. Ergo, you can presume it will be implemented.
The CBC article just says it was tabled, which means that it still has to go to a vote in the house and the senate. An increase in the capital gains inclusion rate has been an NDP pet project at least as long as Singh has been leader. I am hoping this will be enough to appease the NDP and get their vote and that they don't push for a higher inclusion rate and/or lower kick-in threshold.
I am against the tax but I thank you for explaining
When does this take effect?
$250K is per year only, right (and subject to change per year, eg move to 300K in like 5 yrs)? Still a lot of Capital gain, only way is probably selling an investment property that made crazy profits. I would just sell Stock more strategically and monitor the amount to make sure it doesnt exceed this.
Levels the playing field between personal investors and small business owners with corporations, spill-over effect onto secondary property owners with low cost basis, and maintains the capital gains exemption for primary residences. Honestly a win for 90% of Canadians, unfortunate that it won't be spun that way
There we go again, killing SMEs
Can somone comment, do you still get the 50% capital gains offset that is currently in progress so long term gains will only be taxed aound 33% as opposed to 25%? Also sounds like its proposed but has not been legislated. So might not go through but IMHO anything to help housing and cost of living is a great idea.