Changes to the Capital Gains Tax - What it means for real estate in BC

If you are the owner of a 2nd home, investment property or cottage, you could be looking at higher taxes when you sell your property under the new proposed federal budget. View the full summary of the Federal Budget here

On April 16th, 2024  the Federal government proposed, effective June 25th, 2024, the following changes to capital gains tax on gains over $250,000:

1. Higher Percentage of Gains Taxable:
The federal government is proposing to change the capital gains inclusion rate — the portion of gains that are taxed — from 50 to 66.7 per cent on gains over $250,000 in a year for individuals. Amounts under $250,000 will be taxed at the previous 50 per cent rate. This adjustment is made with the assumption that it will predominantly impact the wealthiest 0.13% of Canadians and 12% of corporations, thereby targeting high-income earners and major businesses.

2. Impact on Homeowners: The tax change could affect a broad range of Canadians, including those in the middle class, especially those who own secondary properties like cottages or rental units. The raised inclusion rate could significantly influence the financial outcomes from property sales, which may in turn affect retirement planning and estate strategies.

3. Exemptions and Criticisms: The new tax rule excludes sales of primary residences from these changes and is expected to generate substantial government revenue over the next five years. Nevertheless, it has attracted criticism from business leaders, entrepreneurs, and medical professionals who are concerned about the potential adverse impacts on investment in innovation and retirement savings.

Process Change: As of April 30, the federal government has separated the proposed capital gains tax changes from the budget and will instead introduce them as a bill to be publicly voted upon. View the article in the National Post here!

If you have secondary, cottage or investment properties, please book an appointment with your financial planner, a tax lawyer or seasoned accountant who has extensive experience with investment and secondary properties.