The Canadian government proposed changes to the capital gains inclusion rate as part of the 2024 federal budget. The change increased the rate from 50% to 66.67% on capital gains of $250,000 or more. This new increased rate was set to take effect on any gains realized on or after June 25, 2024.

On January 31, 2025, the Department of Finance announced that the implementation of these changes has now been deferred to January 1, 2026. As a result, all capital gains realized before January 1, 2026 will be subject to the current 50% inclusion rate.

In addition to the deferral, the announcement outlines the following capital gains exemptions:

• Principal Residence Exemption: Gains realized on the sale of a primary home will continue to remain tax free.
• $250,000 Annual Threshold for Canadians: Effective January 1, 2026, capital gains up to the $250,000 annual threshold, including gains from the sale of a secondary property, will continue to be subject to the lower 50% inclusion rate.
• Increasing the Lifetime Capital Gains Exemption to $1.25 million: Effective June 25, 2024, the sale of small business shares, farming property and fishing property will benefit from this increased exemption, currently $1,016,836.

What does this mean for individuals filing their 2024 returns?

The CRA will grant late-filing penalty and interest relief for these impacted individuals until June 2, 2025.

Wealthsimple Tax reflects the latest from the CRA and will be updated with the most current capital gains tax forms and corresponding rules.