2024 Federal Budget Highlights

Increase to Capital Gains inclusion rate starting June 25, 2024

– Increase from 50% inclusion rate to 66.67% rate.
– For individuals, the increase to the inclusion rate is for gains in excess of $250,000,     however, for corporations and trusts, the increase in the inclusion rate is on all capital     gains.
– Prior year capital losses will be applied at the inclusion rate of the gain being offset.

As a result of the change, tax rates for capital gains have increased as follows:

Individuals – Highest Marginal Tax Rate above $250,000 in capital gains

Province

50% Inclusion Rate

66.67% Inclusion Rate

Increase %

BC

26.75%

35.67%

8.92%

Corporations

Province

50% Inclusion Rate

66.67% Inclusion Rate

Increase %

BC

25.34%

33.78%

8.44%

Tax integration – concept that money earned in a corporation that is distributed to it’s shareholders should pay the same total tax (corporate and personal) as if the money was directly earned by the individual. Prior to the change, there was a 2.81% tax cost to earning capital gains in a corporation compared to being earned directly by an individual. Subsequent to the change, the tax cost has increased to 3.74% when capital gains are earned in a BC corporation (0.93% increase). The increase in the tax cost, is due to a lower percentage of the gain that can be paid out to the shareholder tax free as a capital dividend.

As a result, the total tax increase from the increase in the capital gains inclusion rate for capital gains realised in a corporation is 9.37% (8.44% + 0.93%).

Lifetime Capital Gains Exemption

– Increase to the exemption on the sale of Qualified Small Business Corporation shares and Qualified Farm and Fishing property to $1.25m starting on or after June 25, 2024. Current exemption amount is $1,016,836.

Volunteer firefighters and search and rescue volunteers tax credit

– The budget doubles the tax credit from $3,000 to $6,000.

Crypto-asset reporting framework

– Proposal is a new annual reporting requirement on Canadian residents who provide services for exchange transactions in crypto-assets. The requirements are aimed at crypto-asset service providers such as crypto asset automated teller machines, crypto exchanges and crypto-asset brokers.

– The proposed rules require the service provider to report to CRA annually:

  • Exchanges between the crypto-asset and fiat currencies
  • Exchanges for other crypto-assets
  • Transfers of crypto-assets for goods and services exceeding $50k USD

 

Newsletter and Blog Subscription

Sign up for our blog and newsletter to receive important accounting tips for you or your business. You can unsubscribe at any time!

User Registration

A career you can grow with.