In the April 2024 federal budget, the government proposed increasing the capital gains inclusion rate — the portion of a capital gain that is added to income and taxed — from one-half (50%) to two-thirds (66.7%), effective June 25, 2024. This is the most significant capital gains tax change in Canada in decades.
What Changed and for Whom
- Individuals: The ½ inclusion rate still applies to the first $250,000 of capital gains per year. Gains above $250,000 in a single year are now subject to the ⅔ inclusion rate.
- Corporations and most trusts: All capital gains are subject to the ⅔ rate, with no $250,000 threshold.
- Effective date: June 25, 2024. Gains realized before that date in the 2024 tax year are still subject to the old ½ rate.
As of early 2025, the legislation implementing the higher rate had not received Royal Assent (Parliament was prorogued in January 2025). However, the CRA announced it will administer the new rates for 2024 tax returns. The political status of this change is still evolving — we will keep this page updated.
Lifetime Capital Gains Exemption (LCGE)
To offset some of the impact, the federal government also increased the Lifetime Capital Gains Exemption for qualified small business corporation (QSBC) shares from $1,016,602 to $1,250,000, effective June 25, 2024. This benefits business owners who sell shares of a qualifying corporation — a significant relief for small business succession planning.
What This Means in Practice
For most individual investors selling stocks or mutual funds, if your capital gains are under $250,000 per year, nothing changes. You still pay tax on 50% of the gain. If you sold a rental property, a vacation home, or a significant investment portfolio in 2024 and realized gains above $250,000, the gains above that threshold are now taxed more heavily.
For a corporation — say, a small business or a holding company — the change is more impactful. All capital gains in a corporation are now at the ⅔ rate, which affects strategies like holding investment portfolios inside a corporation, selling appreciated real estate held in a corp, or structuring business sales.
What to Do
- If you have unrealized capital gains in a corporation, talk to your accountant about whether it makes sense to restructure before triggering those gains.
- If you're planning to sell a business or property, understanding the new inclusion rate is essential to timing the transaction correctly.
- If you're close to the $250,000 threshold in a given year, spacing out gains across multiple years can keep you under it.
- Ensure your accountant is tracking your pre- and post-June 25 gains separately for the 2024 return.
This article is for general information only. Tax rules change frequently and individual circumstances vary. Contact a qualified CPA before making tax decisions.