On January 31, Dominic LeBlanc, Minister of Finance and Intergovernmental Affairs, announced the federal government is deferring—from June 25, 2024, to January 1, 2026—the date on which the capital gains inclusion rate would increase from one-half to two-thirds on capital gains realized annually above $250,000 by individuals (and certain trusts) and on all capital gains realized by corporations and most types of trusts.
This announcement comes days after the launch of a court challenge of the CRA’s decision to administer the proposed legislation in the upcoming tax season in accordance with the precedent that it normally follows.
The proposed increase of the Lifetime Capital Gains Exemption to $1.25 million (from $1,016,836) will still take effect on June 25, 2024, as originally planned. The proposed Canadian Entrepreneur’s Incentive will also take effect on January 1, 2025, as originally planned. The government announced that it will introduce legislation to implement these two measures in due course.
Filing implications for individuals and trusts
In the coming weeks, the CRA will issue new forms that reflect the current one-half inclusion rate. The CRA also will work quickly to update its systems.
The CRA will grant relief in respect of late-filing penalties and arrears interest until June 2, 2025, for impacted T1 Individual filers and until May 1, 2025, for impacted T3 Trust filers to provide additional time for taxpayers reporting capital dispositions to meet their tax filing obligations.
The CRA will also administer the proposed increase to the Lifetime Capital Gains Exemption.
Filing implications for corporations
Corporations can continue to use existing forms and tax software to file using the one-half inclusion rate until further notice. For corporations that followed CRA’s guidance to file in accordance with the NWMM tabled in Parliament on September 23, 2024, the CRA will coordinate corrective reassessments to reverse the application of the two-thirds inclusion rate.
