Finance
LeBlanc Postpones Canada’s Capital Gains Tax Till 2026
(CTN NEWS)—In breaking news today, Canada’s federal Finance Minister Dominic LeBlanc announced that he will postpone the implementation of the capital gains tax until January 1, 2026.
LeBlanc announced the deferral in a press release today, stating that it would “maintain or enhance” existing exemptions while also creating new investor incentives.
The tax increase would raise the inclusion rate on capital gains paid by businesses from 50% to two-thirds. Individually, the changes would apply to those who earned more than $250,000 in capital gains tax.
“Given the current situation, our government believed it was the responsible thing to do. I look forward to further discussions with Canadians about how we can ensure that Canada’s fiscal policy promotes robust and sustained economic activity in all regions of the country,” LeBlanc said.
He highlighted four exemptions that were either maintained or created. One was the principal residence exemption, which was maintained to “ensure Canadians do not pay capital gains taxes when selling their home,” according to LeBlanc.
Ottawa also announced a new $250,000 annual threshold for Canadians, effective January 1, 2026, along with an increase in lifetime capital gains to “ensure individuals earning modest capital gains tax” can benefit from the one-half inclusion rate.
“Capital gains, including on the sale of a secondary property, such as a cottage, will be eligible for the $250,000 annual threshold, meaning a couple selling a cottage with a $500,000 capital gain would not pay more tax,” according to a release.
The third exemption was a proposal to increase the lifetime capital gains exemption for the sale of small business shares, as well as farming and fishing property, to $1.25 million from the current amount of $1,016,836. The government says this exemption will take effect on June 25, 2024.
“With this increase, Canadians with eligible capital gains below $2.25 million would pay less tax and be better off, even after the inclusion rate increases on January 1, 2026,” he said.
Finally, he stated that the Canadian government is introducing a new incentive “to encourage entrepreneurship by reducing the inclusion rate to one-third on a lifetime maximum of $2 million in eligible capital gains.”
“This incentive would take effect in the 2025 tax year, with the maximum increasing by $400,000 each year until it reaches $2 million in 2029.
When combined with the new $1.25 million lifetime capital gains exemption, entrepreneurs would pay less tax and benefit from capital gains of up to $6.25 million when fully implemented.
The increased capital gains tax inclusion rate was first proposed in the federal government’s budget in April of last year and later enacted through a Ways and Means motion. However, parliament has not approved the change, which is prorogued until March 24.
Revenue Canada Halts Capital Gains Tax Collection
Meanwhile, the Canada Revenue Agency (CRA) announced in a Friday press release that due to the government’s announcement, it would return to administering the current capital gains inclusion rate of one-half.
This means capital gains made before January 1, 2026, will be subject to the “currently enacted inclusion rate of one-half, unless an exemption applies.”
“The announcement confirms the government’s intention that, effective for dispositions that occur on or after January 1, 2026, the inclusion rate will increase from one-half to two-thirds on capital gains realized in excess of $250,000 annually for individuals and on all capital gains realized by corporations and most types of trusts,” according to a release.
The deferral will provide more clarity for individuals and businesses that were previously uncertain.
Earlier this month, the Canada Revenue Agency (CRA) announced that it would continue to administer the capital gains tax changes even though Parliament had not passed them.
Jessica Brandon-Jepp, senior director of fiscal and financial services policy at the Canadian Chamber of Commerce, told BNNBloomberg.ca earlier this month that some Canadians and businesses were concerned about how the measure would be enforced following Parliament’s prorogation.
“It is inappropriate—and, by our analysis, unprecedented—for a government to continue to implement a tax change solely based on a ‘Ways and Means’ motion, with the clear threat of a non-confidence motion and no clear timeline to table legislation,” according to Brandon-Jepp.
“This increased uncertainty compounds the impact of this tax increase in driving away new investment and entrepreneurship from our country at the exact moment we need it most.”
