The new capital gains inclusion rate (CGIR) has made tax planning even more confusing. So here is a breakdown in simpler terms:
Before June 15th, we knew that the CGIR was 50% on personal capital gains, and gains inside a corporation. Now, there are different rules on capital gains inside a corporation and personal capital gains.
Personal Capital Gains
When you trigger a capital gain, all profit under $250k will still be subject to a 50% CGIR. Gains above $250k will have an inclusion rate of 66%.
• Proper tax planning will allow most individuals to keep their stock gains below the new CGIR threshold by managing annual stock sales to stay under $250k in profits.
• This new inclusion rate will impact everyday people when selling assets like a cottage, where the entire gain must be realized at once.
For example: If you were selling a cottage for a $500,000 profit, the first $250,000 would be subject to the 50% inclusion rate, and the next $250,000 would be subject to the 66% inclusion rate. This could result in up to $21,412 in extra tax under the new regime.
Corporate Capital Gains
All capital gains are taxed at the new 66% inclusion rate, there is no $250k threshold. Owning stock and investment properties inside a corporation just got more expensive.
If you were planning on selling your property in the near future, consult a CFP or tax planner right away to see if you should trigger any gains before the June 15th deadline.
If you have any questions, reach out to our team.
