04/17/2024
As some of you might know, the Federal Budget for 2024 came out today. I am sure we all want to know what is new and how it will impact you as an individual and also your businesses.
Some of the changes are quite impactful and surprising, here's a Cole's note version.
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🚨 2024 Federal Budget Update: Key Tax Changes Impacting You and Your Business 🚨
Let’s break down some major updates from the 2024 federal budget that could affect your wallets and businesses:
1️⃣ Capital Gains Tax Changes:
• For Individuals: The capital gains inclusion rate is going up from 1/2 to 2/3 starting June 25, 2024 for amounts that exceed $250,000 annually.
• For Corporations and Trust: All capital gains realized by corporations and trusts – will rise from one-half to two-thirds.
• Example: If you sell an investment property as an individual and your capital gain is $300,000, $250,000 of that will be taxed at the old rate, and the remaining $50,000 at the new higher rate of 2/3.
• Note: Since any capital gain is taxed at the higher rate of 2/3, the proposed rules makes it less attractive for individuals earning capital gains in excess of $250,000 through a CCPC instead of directly.
2️⃣ Lifetime Capital Gains Exemption (LCGE):
• The exemption has been increased to $1.25 million (from the previous ~$1 million) for dispositions after June 25, 2024. This is great news if you’re planning to sell your small business!
• Example: A tech startup founder selling their business could now shield an additional approx. $250K of capital gains from taxes compared to before.
3️⃣ Canadian Entrepreneurs’ Incentive:
• This new incentive reduces the taxes on capital gains for the sale of small business shares to a 1/3 inclusion rate, with a lifetime limit of $2 million in capital gains.
• This applies for shareholders who own more than 10% of the company.
• Note that this incentive does not apply for a range of industries: financial, insurance, real estate, food and accommodation, arts, recreation, or entertainment sector; or providing consulting or personal care services. More guidance will be provided on what type of business qualifies.
• Example: Combined with the budget’s proposed increased lifetime capital gains exemption (LCGE) of $1.25 million from $1,016,836, entrepreneurs will have a combined exemption of at least $3.25 million when selling all or part of a business, once the incentive is fully rolled out
4️⃣ Other Updates:
🌱 Clean Energy Investments:
• A new tax credit for investments in clean electricity could help businesses transitioning to green energy save on costs.
🏠 For Property Owners:
• Accelerated CCA rates for new purpose-built rental housing projects could make real estate investments more attractive.
🤔 What does this mean for you?
• Business Owners: It’s a good time to reassess your exit strategies and investment plans, especially with new incentives for small businesses.
• Individuals with Investments: Consider how the capital gains changes might impact when and how you sell your investments (including larger portfolio of stock and/or real estates)
👥 Hope that was a helpful update.
