The 2024 Canadian federal budget, delivered in April, focused on economic recovery and long-term growth. While overall tax rates remained unchanged, several key measures aimed to incentivize investment, support entrepreneurs, and address affordability concerns. Let’s delve into the budget’s tax highlights:
Capital Gains
The most significant change involves capital gains – the profit earned from selling investments like stocks or real estate. The budget proposes a two-pronged approach:
Increased Inclusion Rate: Effective June 25, 2024, the capital gains inclusion rate will increase from 50% to 66.67% (2/3) for corporations, trusts, and for individuals on the portion of capital gains exceeding $250,000 annually. This means a larger share of capital gains will be taxed as income.
Lifetime Capital Gains Exemption (LCGE) Increase: To offset the inclusion rate hike, the budget proposes raising the LCGE – the cumulative amount of capital gains exempt from taxation throughout your lifetime – to $1.25 million.
Canadian Entrepreneurs’ Incentive (CEI): A new incentive aims to foster entrepreneurship. The CEI offers a reduced capital gains inclusion rate of 33.33% (1/3) on up to $2 million of qualifying capital gains realized by eligible individuals over their lifetime. However, this benefit phases in gradually, reaching its full potential by 2034.
Tax Breaks for Businesses
The budget recognizes the importance of small businesses to the Canadian economy. Here are some measures aimed at supporting them:
Canada Carbon Rebate for Small Businesses: To help with carbon pricing costs, a new refundable tax credit is proposed for eligible small businesses.
Digital Services Tax (DST): While details are forthcoming, the budget reaffirms Canada’s commitment to a DST targeting the revenue of large multinational digital corporations.
Volunteer Appreciation: The budget proposes doubling the tax credit for volunteer firefighters and search and rescue volunteers, recognizing their vital contributions.
Other Measures
The budget also includes:
Clean Technology Investment Tax Credits: Details on the Clean Electricity Investment Tax Credit and adjustments to the Clean Technology Manufacturing Investment Tax Credit were announced, promoting investments in clean technology.
Alternative Minimum Tax (AMT): The budget proposes amendments to the AMT to ensure large corporations pay a minimum level of tax.
Conclusion
The 2024 Canadian budget introduces a mix of tax measures. While some, like the increased capital gains inclusion rate, aim to raise revenue, others, like the CEI and tax breaks for small businesses, aim to stimulate specific sectors. It’s important to consult with a tax professional to understand how these changes might impact your specific situation.
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