The Increasing Capital Gains Inclusion Rate: Think First, (Maybe) Act Later

Much has been made (and continues to be made) of the government's decision in the 2024 federal budget to increase the portion of capital gains that are included in income from 50 per cent to 66^2/3 per cent, effective June 25, 2024. Starting then, for natural persons two-thirds of capital gains realized each year above $250,000 will be included in income (any favourably taxed stock option benefits realized will reduce the $250,000 limit). For corporations and trusts, the two-thirds inclusion rate will apply to all capital gains realized on or after June 25, 2024. For an Ontario resident subject to tax at the highest marginal rate, the change in inclusion rate represents an increase in the effective tax rate on capital gains from roughly 26.8 per cent to 35.7 per cent. The result is to leave Canada with one of the highest marginal capital tax rates in the world.