On April 16, 2024, Finance Minister Chrystia Freeland released the Liberal Government’s federal budget. Titled Fairness For Every Generation, Budget 2024 with net new spending of $39.2 billion over the next five years and includes significant changes to capital gains tax, with some support on the sale of small businesses and a focus on affordability.
Insight:
Budget 2024 does not propose changes to the following items:
- Personal income tax rates;
- Corporate income tax rates; and
- The Principal Residence Exemption.
Budget 2024 also does not introduce a wealth tax for individuals.
However, Budget 2024 does propose to:
- Increase the capital gains inclusion rate for corporations, trusts, and certain individuals;
- Increase the Lifetime Capital Gains Exemption; and
- Introduce a new Canadian Entrepreneurs’ Incentive to provide preferential tax treatment for sales of qualifying shares of a business.
Highlights:
Changes to capital gains tax
- Increase the capital gains inclusion rate from 50% to 66.67%:
- On capital gains over $250,000 realized by individuals
- On all capital gains realized by corporations and trusts
- For capital gains realized on or after June 25, 2024
- Revise Alternative Minimum Tax proposals impacting philanthropy
- Permit 80% of charitable donation tax credits to be claimed
Support for small businesses
- Increase the Lifetime Capital Gains Exemption to $1.25 million
- 23% ↑ in the exemption for dispositions on or after June 25, 2024
- Introduce the Canadian Entrepreneurs’ Incentive:
- Preferential capital gains inclusion rate of 33.33% on up to $2 million of eligible capital gains
- $2 million limit is phased in by $200,000 increments per year from 2025 until 2034
Focus on housing
- Increase the Home Buyers’ Plan (HBP) withdrawal limit from $35,000 to $60,000
- Temporarily defer HBP repayment period by an additional 3 years
- Permit 30-year mortgage amortizations for first-time buyers of newly built homes
- Invest in national housing and health programs
- Launch a new Canada Disability Benefit