Will the Capital Gain Inclusion Rate Increase?
Over the past couple of years, there has been speculation in the tax community that the capital gain inclusion rate of 50% may increase. Historically, rates have been as high as 66.75% and up to 75%. Depending on which province you live in, at present, the top personal marginal tax rate will vary from a low of 24% for an Alberta resident to 26.75% in British Columbia (incidentally, the top personal tax rate on capital gains for Newfoundland and Labrador is the highest in the country at 27.40%).
If the capital gain inclusion rate changes are announced in the next Federal Budget, it could be effective on that Budget Day. Over the past few years, the Government has implemented tax measures targeting tax planning strategies primarily used by high net worth individuals and their corporations. Therefore, individual investors should consider this as a signal to re-evaluate their portfolio and tax planning given that the ‘profit window’ could narrow soon.
Investors might want to re-consider their tax planning. Instead of just rebalancing a portfolio and recognizing gains now, you can incorporate slightly more sophisticated tax strategies that could leverage time now versus reacting on (or after) Budget Day and being too late.
Some tax strategies could include the following:
- An asset to be sold in the near future – setting up a holding company, selling an asset to it, and triggering a capital gain as a result of its sale
- Inter-generation and estate planning – triggering capital gains on the sale of an asset to an adult child and / or a gift
- Sale of real estate – consider an appropriate closing date
It is always best to contact a trusted Crowe MacKay advisor to discuss these issues along with potential tax planning tailored to you in an effort to minimize your tax exposure.
This article has been published for general information. You should always contact your trusted advisor for specific guidance pertaining to your individual tax needs. This publication is not a substitute for obtaining personalized advice.
If you are looking for Tax Services, Crowe MacKay provides personalized support. Our tax professionals will help you maximize tax-planning opportunities and ensure the minimum amount required by law is paid.
