Capital Gains Rate Increase Deferred until January 1, 2026

JANUARY 31, 2025

This morning the federal government announced that the planned increase to the capital gains inclusion rate will be deferred and not take effect until January 1, 2026. We are thankful that the policy decision makers finally came to a conclusion that most of us reached over a month ago.

The following is a quick refresher on how we reached this point:

1.         The government announced the proposed change in the spring 2024 budget.

2.         The change was introduced in a ways and means motion in June, 2024 and amendments were added in the fall; however, the bill never made it through the full legislative process.

3.         Parliament is now prorogued, meaning all in-progress legislation is delayed.

4.         The government officially announced the deferral. You can view the news release here: https://www.canada.ca/en/department-finance/news/2025/01/government-of-canada-announces-deferral-in-implementation-of-change-to-capital-gains-inclusion-rate.html

Key Details

  • Current Inclusion Rate: The capital gains inclusion rate remains at 50%. This means only half of the capital gains realized are subject to tax.

  • Proposed Increase: The government had proposed increasing the inclusion rate to 66.67% for capital gains above a certain threshold.

  • New Timeline: The increase will now come into effect on January 1, 2026, providing additional time for individuals and businesses to plan accordingly.  However, with the likelihood of a new government coming to power this scheduled increase is likely to never happen.

The deferral of the capital gains rate increase offers, at a minimum, a window of opportunity for taxpayers to review their financial and tax planning strategies. If you are considering selling assets that may trigger capital gains, such as real estate, investments, or business assets, the next two years may be an advantageous time to act. However, the best strategy for the next six months is to take a pause from any tax distractions while the dust settles.

Our team at RMR is here to help you navigate these changes and optimize your tax planning - please don’t hesitate to reach out to us if you have any questions or would like to discuss your options further.