18 Feb Capital Gains Tax Increase Deferred: What It Means for You

On January 31, 2025, the Canadian federal government announced a deferral of the proposed capital gains inclusion rate increase. Originally set to take effect on June 25, 2024, the change has now been postponed to January 1, 2026.

Background on the Proposed Changes

In April 2024, the government proposed increasing the capital gains inclusion rate from 50% to 66.67%. This change would apply to:

• Individuals with total annual capital gains exceeding $250,000
• All corporations and most types of trusts

The measure aimed to generate approximately $20 billion over five years to fund initiatives such as affordable housing and deficit reduction.

Political Challenges and Implementation Delays

The proposal faced significant political hurdles and failed to pass the House of Commons. The Prime Minister suspended Parliament on January 6, 2025, further delaying its approval.

Despite this, the Canada Revenue Agency (CRA) had already begun collecting the increased tax on transactions occurring on or after June 25, 2024, creating uncertainty for taxpayers.

Deferral to 2026

To address these challenges, the government has deferred the implementation date to January 1, 2026. This means:

• The capital gains inclusion rate remains at 50% until 2026.
• Taxpayers who realized capital gains after June 25, 2024, will not face higher taxes under the proposed increase.
• The CRA will continue administering capital gains tax under the current rules until further notice.

What This Means for Taxpayers

The deferral provides an opportunity for tax planning and financial strategy adjustments:

• More time to assess the potential tax impact and structure transactions accordingly.
• Reduced uncertainty for those filing returns on capital gains realized after June 24, 2024.
• Political uncertainty remains—a non-confidence vote is expected when Parliament resumes, and a general election could determine whether the tax increase will proceed at all.

Strategic Planning Opportunities

If you missed the 2024 window to trigger capital gains at the lower 50% inclusion rate, there may still be planning opportunities:

• Considering a capital property sale in 2026 or 2027? You may want to explore structuring transactions now to lock in the lower rate before any potential increases.
• Uncertain about your tax exposure? Clearline CPA can provide insights on tax-efficient strategies to minimize liability.

Next Steps

With the capital gains tax increase still uncertain, now is the time to review your tax strategy and prepare for possible changes. Contact your Clearline representative to discuss your options and ensure you’re positioned for the best tax outcome.