On January 31st, Finance Minister Dominic LeBlanc announced that the federal government is postponing the increase of the capital gains inclusion rate from 50% to 66.67% for capital gains above $250,000, now set for January 1, 2026. To protect middle-class Canadians from higher taxes, the government will maintain or enhance capital gains exemptions and introduce new incentives. Key measures include
maintaining the Principal Residence Exemption,
introducing a $250,000 annual threshold for modest gains including sales of secondary property (effective January 1, 2026),
increasing the Lifetime Capital Gains Exemption to $1.25 million effective June 25, 2024 on the sale of small business shares and farming/fishing property, and
launching a Canadian Entrepreneurs’ Incentive that reduces the inclusion rate for eligible gains. This incentive would take effect starting in the 2025 tax year and the maximum would increase by $400,000 each year, reaching $2 million in 2029. Combined with the new $1.25 million lifetime capital gains exemption, when this incentive is fully rolled out, entrepreneurs would pay less tax and be better off on capital gains of up to $6.25 million
These changes aim to support individuals and entrepreneurs while ensuring they are not adversely affected by the new capital gains inclusion rate.