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The Canadian government presented the 2024 federal budget on April 16, and it contains several proposals of interest to Canadians. Below are the highlights of the budget proposals.
Capital gains inclusion rate to increase
Currently, the capital gains inclusion is 50%, meaning half of any capital gain is taxable, and the other half is tax free. The budget proposes to increase the capital gains inclusion rate to two-thirds for corporations and trusts, as well as for the portion of capital gains realized by individuals in a year that exceed $250,000.
Making first-home ownership more achievable
The budget proposes to increase the amount that homebuyers can withdraw from their RRSP to buy their first home. The Home Buyers’ Plan previously had a limit of $35,000, but the budget proposes that this be increased considerably, to $60,000. The repayment period (within which the whole amount withdrawn must be repaid into an RRSP) is being extended by three years, for anyone who withdraws from the Home Buyers’ Plan between January 1, 2022 and December 31, 2025.
Tax incentives for small and medium businesses
The Lifetime Capital Gains Exemption will increase by 25% to $1.25 million, which will bring a considerable tax benefit to many entrepreneurs when they come to sell their business. A new Canadian Entrepreneurs Incentive will also allow entrepreneurs the ability for a reduced inclusion rate on the sale of shares of up to a lifetime limit of $2 million when it is fully rolled out by 2034.
A new Canada Carbon Rebate will provide an automatic refundable tax credit to eligible businesses, based on how many employees they have. The budget proposes to increase the Capital Cost Allowance rate for new eligible purpose-built rental housing from 4% to 10%, allowing owners to claim larger deductions.
AMT rule changes are good news
The Alternative Minimum Tax (AMT) is a parallel tax calculation that allows fewer tax credits, deductions and exemptions than with ordinary personal income tax rules. The budget proposes further changes to the AMT rules, which include increasing the charitable tax credit to 80% (from 50%) and fully allowing deductions for GIS, social assistance and workers’ compensation payments.
Read our in-depth analysis for insights into how the federal budget may affect your clients.
This document may contain forward-looking information which reflect our or third party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of April 16, 2024. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.
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