11/22/2024
https://youtu.be/VLlWkmCWWws?si=Ou1MfrW4bn7pV06g
Many tax payers face higher tax bills this year as a result of the higher inclusion rate on capital gains exceeding $250,000. Prior to June 25, 2024 all capital gains were included in income at 50%, which is still the case for capital gains under $250,000. However, capital gains exceeding $250,000 are now included in income at 67% or 2/3.
We discuss various tax planning techniques to avoid the higher income inclusion rate. Through the use of Registered Investment Accounts, balancing capital gains by invoking capital losses and using capital gain reserves. While this change was targeted towards higher income earners, it does have an effect on lower income earners who own more then one property. We discuss the use of joint home ownership or optimizing the principle residence designation to reduce capital gains below $250,000 and taking advantage of the lower inclusion rate.
While trusts are affected by this change, with most trust we can allocate out the capital gains to the beneficiaries, allowing us to take advantage of income splitting. Graduated rate and qualified disability trusts have access to the lower 50% inclusion rate on the first $250,000 of capital gains. Alter ego, spousal and joint spousal trusts will see higher tax bills upon the passing of the settlor and or their spouse / partner. At this time assets will be deemed disposed of at fair market value and exposed to the full effect of the 67% income inclusion rate. However, in most cases the savings in probate fees, significantly exceeds the increased tax on capital gains as a result of the higher inclusion rate.
At McPhee Accounting we specialize in tax planning and preparation, alongside general accounting services. Our corporate returns start at $500 and personal returns at $100. Contact us today to receive a free consultation and allow us to reduce your tax liability resulting from the changes in the capital gains inclusion rate.
Mitchell McPhee
Accountant
(902) 293-1891
[email protected]
www.mcpheeaccounting.ca
We go over the effects of the changes made to the capital gains inclusion rate as purposed in the 2024 federal budget. First, walking through how a capital g...
