As of January 31, 2025, the Canadian government announced a deferral of the proposed increase in the capital gains inclusion rate from 50% to 66.7%.

Originally intended to take effect on June 25, 2024, this change has been postponed to January 1, 2026. This decision follows the prorogation of Parliament on January 6, 2025, which halted legislative proceedings, including the passage of the necessary tax legislation. This is despite many actions taken by investors prior to June 2024 trying to avoid the tax increase.

Despite the lack of formal legislative approval, the Canada Revenue Agency (CRA) originally continued to administer the increased tax rate since June 2024 based on the 66.67% inclusion rate. On January 31, 2025, the Canada Revenue Agency (CRA) reverted to administering the currently enacted capital gains inclusion rate of one-half. This means that all capital gains realized before January 1, 2026 will be subject to the currently enacted inclusion rate of one-half, unless an exemption applies.

However, the deferral introduces uncertainty, as the proposed changes may not be enacted as planned due to potential political developments, including upcoming federal elections. Taxpayers should remain informed and consult with Connect Live CPAs if they have concerns or are considering disposing of assets which will give rise to a capital gain or loss. Be proactive and consult with us prior to disposing not after any deal is agreed to.