LILLEY: Trudeau's capital gains tax mess not going to plan (2024)

FAQs

Is Canada going to change capital gains tax? ›

In Budget 2024, the federal government announced changes to capital gains taxation to make Canada's tax system fairer. In Budget 2024, the federal government announced changes to capital gains taxation to make Canada's tax system fairer.

Retirement accounts such as 401(k) plans, and individual retirement accounts offer tax-deferred investment. You don't pay income or capital gains taxes at all on the assets in the account. You'll just pay income taxes when you withdraw money from the account.

This means that if you sell your home for a gain of less than $250,000 (or $500,000 if married, filing jointly), you will not be obligated to pay capital gains tax on that amount.

New tax threshold on capital gains.

For the 2024 tax year, individual tax filers will not have to pay any capital gains tax if their total taxable income is $47,025 or less. That's an increase from the income threshold of $44,625 in 2023. The capital gains tax rate jumps to 15% if your income is $47,026 to $518,900.

Special Rules for Fiscal Periods Straddling June 25, 2024

$250,000 Capital Gains Threshold: Each individual partner's $250,000 capital gains threshold would apply for the purposes of determining the effective inclusion rate of their capital gains allocated from the partnership.

Whether you're 65 or 95, seniors must pay capital gains tax where it's due. This can be on the sale of real estate or other investments that have increased in value over their original purchase price, which is known as the “tax basis.”

For properties inherited by heirs other than a spouse, the estate can claim the PRE for the years the deceased owned and used the property as their principal residence, potentially reducing or eliminating capital gains tax up to death.

When you make a profit from selling a small business, a farm property or a fishing property, the lifetime capital gains exemption (LCGE) could spare you from paying taxes on all or part of the profit you've earned.

Usually, a property stops being your main residence when you stop living in it. However, for CGT purposes you can continue treating a property as your main residence: for up to 6 years if you used it to produce income, such as rent (sometimes called the '6-year rule')

How to pay 0 capital gains tax? ›

Capital gains tax rates

A capital gains rate of 0% applies if your taxable income is less than or equal to: $44,625 for single and married filing separately; $89,250 for married filing jointly and qualifying surviving spouse; and.

When does capital gains tax not apply? If you have lived in a home as your primary residence for two out of the five years preceding the home's sale, the IRS lets you exempt $250,000 in profit, or $500,000 if married and filing jointly, from capital gains taxes.

You can avoid capital gains tax when you sell your primary residence by buying another house and using the 121 home sale exclusion. In addition, the 1031 like-kind exchange allows investors to defer taxes when they reinvest the proceeds from the sale of an investment property into another investment property.

Reinvest in new property

The like-kind (aka "1031") exchange is a popular way to bypass capital gains taxes on investment property sales. With this transaction, you sell an investment property and buy another one of similar value. By doing so, you can defer owing capital gains taxes on the first property.

The seller must not have sold a home in the last two years and claimed the capital gains tax exclusion. If the capital gains do not exceed the exclusion threshold ($250,000 for single people and $500,000 for married people filing jointly), the seller does not owe taxes on the sale of their house.9.

A significant bump in the Lifetime Capital Gains Exemption (LCGE) to $1.25 million: The $1 million LCGE for sales of small business shares or assets for fishers and farmers will rise to $1.25 million as of June 25, 2024. It will be indexed to inflation starting in 2026.

Canadians must report taxable capital gains as income on their tax return. Under the Liberals' new plan, the capital gains inclusion rate would rise from 50 per cent to 67 per cent for those with more than $250,000 in capital gains in a year.

Under the new tax regime, long-term capital gains on equities and units of mutual funds up to Rs 1 lakh are not taxable. Gains exceeding Rs 1 lakh are taxed at a rate of 10 per cent.