What you need to know about the 2024 Federal Budget
The Canadian government presented the 2024 federal budget on April 16, and it contains several proposals that may impact you. We’ve picked out the top three proposed changes that we think will have the biggest impact and have summarized them here.
1. Capital gains inclusion rate to increase on June 25th, 2024
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.
Planning point: it is important to note that selling a principal residence will continue to be exempt from capital gains taxes. Also, in situations where the higher capital gains inclusion rate may apply, there may be tax planning opportunities available to spread the capital gain over multiple years to stay within the $250,000 annual threshold.
2. 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 The repayment period (within which the whole amount withdrawn must be repaid into an RRSP) is being extended by three years, for anyone who withdraws from the Home Buyers’ Plan between January 1, 2022 and December 31,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.
Planning point: With the new FHSA already helping many Canadians, and now the increased HBP limits, Canadians will have more opportunity to access funds for the purchase of their first home. Also, the temporary relief measures give first-time home buyers up to five years before they need to start repayments, so they can focus on their mortgage payments and getting ahead.
3. 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.
Planning Point: Be sure your corporate structure is such that you can take advantage of the exemption upon sale of your business.
For a more comprehensive breakdown of the entire budget, you can find more details here in the attached report from CI Global Asset Management.
Please reach out if you have any questions or concerns on how the changes affect you, your family, or your business.