On April 16, Finance Minister Chrystia Freeland tabled the 2024 federal budget. One particular proposal garnered significant attention from property owners—specifically cottagers—across the country: an increase to the capital gains inclusion rate.
Capital gains on a property happen when someone sells (or gifts) the property for more than they purchased it. Under current regulations, Canadians are taxed on 50 per cent of that capital gain. If you sold your cottage for $900K, for example, but purchased it for $100K, you’d be on the hook for paying taxes on $400K—half of your $800K capital gain. Essentially that $400K would be added to your income and you’d be taxed at your marginal tax rate.
Effective June 25, 2024, the new proposed inclusion rate is two-thirds (about 66.7 per cent) of all capital gains above $250,000. Gains below the $250K mark will continue to be taxed at the 50 per cent rate. So, if you sell your cottage for $900K and turn a profit of $800K, you’re taxed on 50 per cent of the first $250K (amounting to $125K), and two-thirds, or about 66.7 per cent, on the remaining $550K (amounting to $366,666). Your total taxable amount? $491,666, an increase of nearly 23 per cent.