The Federal Government presented their highly anticipated 2024 budget, with a focus on housing affordability and economic growth. Although there were no changes to the income tax rates, the government proposed changes to the amount of capital gains included in income.

Beginning June 25, 2024, two-thirds (or 66.67%) of capital gains incurred by a corporation or trust will be included in income. The same applies for individuals in respect of capital gains incurred over a $250K threshold (net of capital losses). This is an increase from the previous 50% inclusion rate that has applied for many years.

The principal residence exemption will continue to apply to exempt capital gains on principal residences, but this change will affect gains incurred on the sale of a secondary property (such as a cottage). The change in capital gains inclusion rate will also apply to capital gains realized from a deemed disposition on death, meaning we can expect estates to have a larger tax liability and more complex tax filings.

We will be reviewing each corporation and trust to see if it makes sense to trigger last minute capital gains prior to June 25, 2024.

Finally, in an effort to target housing affordability, the Federal Government has proposed changes to the Home Buyers Plan to increase the amount an individual can withdraw from of their RRSP for their first home purchase from $35K to $60K, along with a deferral of the repayment period. For individuals who made their first withdrawal between January 1, 2022 and December 31, 2025, the repayment period will be extended another 3 years, giving the individual 5 years before their first repayment is required.

The 2024 Budget proposed a number of additional measures including changes to Alternative Minimum Tax and tax incentives for small business owners, namely an increase in the Lifetime Capital Gains Exemption limit and the introduction of the new Canadian Entrepreneurs’ Incentive. For more details, please refer to the article prepared by RBC DS: Federal budget 2024: Key measures that may have a direct impact on you.

If you have any questions, please do not hesitate to reach out to someone from our team.

All the best,

Livingston Wealth Management Group