MIL-OSI Translation: The Government of Canada provides tax fairness for every generation

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MIL OSI Translation. Canadian French to English –

Source: Government of Canada – in French

June 10, 2024 – Ottawa, Ontario – Department of Finance Canada

The government is determined to provide tax fairness to Canadians. Today, Canadians pay taxes on their income. However, they only pay taxes on half of the capital gains, which is the profit usually generated when an asset, such as stocks or rental housing, is sold.

The Honorable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, today tabled in Parliament a notice of ways and means motion. This will provide better tax fairness and implement the changes to the capital gains tax announced in the 2024 budget.

As of June 25, 2024, the capital gains inclusion rate — that is, the amount of capital gains that are taxable — will increase from one-half to two-thirds on the portion of capital gains realized over the course of a year exceeding $250,000 for individuals. It will apply to all capital gains realized by corporations and most types of trusts. This will make Canada’s tax system fairer. An amount of $19.4 billion will be raised over five years to finance the construction of nearly 4 million homes. This income will also make it possible to make investments to reduce the cost of living and grow the economy, for every generation, but especially millennials and Generation Z.

To ensure that middle-class Canadians and Canadian entrepreneurs do not pay more taxes, the government is maintaining existing capital gains exemptions and creating new ones. These exemptions include the following:

Maintain the principal residence exemption to ensure people do not pay capital gains tax when they sell their homes. All profits made during this sale will remain tax free. Establish a new annual threshold of $250,000 for the Canadian population, starting June 25, 2024, so that people who receive modest capital gains continue to benefit from the current inclusion rate of one-half. The annual threshold of $250,000 will apply to capital gains, such as those from the sale of a second home (for example, a chalet). Consequently, a couple who sells their cottage and realizes a capital gain of $500,000 would not pay more tax. Increase the lifetime capital gains exemption to $1.25 million, starting June 25, 2024, from the current maximum amount of $1,016,836 on the sale of small business shares, and farm property or fishing. This increase will allow Canadians with eligible capital gains of less than $2.25 million to pay less tax and be in a better position. Offer a new incentive for Canadian entrepreneurs to encourage entrepreneurship. This incentive will reduce the inclusion rate to one-third on a maximum lifetime sum of $2 million in eligible capital gains. Combined with the new total lifetime capital gains exemption of $1.25 million, once this incentive is fully implemented, entrepreneurs will pay less tax and be better off when their capital gains do not exceed $6.25 million.

The government is increasing the capital gains inclusion rate — except for the exceptions noted above — to make the Canadian tax system fairer. Currently, the wealthiest people can enjoy a lower marginal tax rate on their capital gains than middle-class workers on their paychecks. For example, a nurse in Ontario earning $70,000 would be subject to a combined federal-provincial marginal rate of 29.7%. In comparison, a wealthy person in Ontario with an income of $1 million would face a marginal tax rate of 26.8% on their capital gains.

In Budget 2024, the federal government is building a more equitable Canada where every generation can reach their full potential. It makes the country’s tax system fairer by asking the richest to pay their fair share so that the government can invest in the prosperity of every generation.

EDITOR’S NOTE: This article is a translation. Apologies should the grammar and/or sentence structure not be perfect.

MIL Translation OSI