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In a significant move to create a fairer tax system, the federal government of
As of
Key Changes:
Increased Capital Gains Inclusion Rate: The capital gains inclusion rate rose to two-thirds from one-half for individuals with capital gains over
Enhanced Lifetime Capital Gains Exemption: To mitigate the impact on middle-class entrepreneurs, the government increased the Lifetime Capital Gains Exemption. This adjustment ensured that most middle-class business owners did not face higher taxes due to these changes, thereby protecting small and medium-sized enterprises from excessive tax burdens.
Canadian Entrepreneurs’ Incentive: A new initiative, the Canadian Entrepreneurs’ Incentive, encouraged investment in capital-intensive and high-growth sectors. This incentive was designed to support entrepreneurial ventures and stimulate economic growth, fostering innovation and job creation across the country.
What’s Not Changing:
Principal Residence Exemption: The government maintained the principal residence exemption, ensuring that Canadians would not pay capital gains taxes when selling their homes. Any profit from the sale of a primary residence remained tax-free, providing stability and predictability for homeowners.
Tax Elections and Paper Realizations: Current tax rules required a capital gain to be realized upon the legal transfer of property ownership. The government did not introduce any election allowing taxpayers to realize gains or losses without an actual transfer, maintaining the existing framework for capital property dispositions.
No Averaging Over Multiple Years: Under the new rules, individuals only paid more tax on capital gains above the
No Sharing of Threshold with Corporations: The
Uniform Application Across Assets: The two-thirds inclusion rate applied uniformly across all sectors, with no exemptions for specific assets or corporations. This approach ensured fairness and prevented preferential treatment in the tax system.
Consistent Rules Regardless of Holding Period: The increased inclusion rate applied uniformly, irrespective of how long an asset had been held. There were no special rules based on the duration of asset ownership, ensuring consistency and simplicity in the application of these changes.
Seeking Professional Guidance: Given these significant changes, Canadians were encouraged to seek proper tax mitigation strategies. Cross-border financial advisors with expertise in both Canadian and
“These changes highlighted the importance of proactive tax planning,” said
About Cardinal Point Wealth Management:
Cardinal Point Wealth Management is a leading cross-border financial advisory firm specializing in integrated wealth management solutions for Canadians and Americans. With a presence in both countries,
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