On April 16th, the Government of Canada released its 2024 Federal Budget. Here are some highlights that may affect you and your business:
Capital Gains Inclusion Rate
The capital gains inclusion rate, which is the portion of capital gains on which tax is paid, will increase from one-half to two-thirds for individuals with more than $250,000 in capital gains in a year. Individuals will continue to only pay tax on 50 per cent of any capital gains up to $250,000 per year. For every dollar beyond $250,000, two-thirds would be taxable.
The inclusion rate will also increase to two-thirds for all capital gains realized by corporations and trusts. The new rules will apply to capital gains realized on or after June 25, 2024, and will only affect about 13% of Canadians.
Selling your principal residence will continue to be exempt from capital gains taxation.
Further amendments reflecting the new inclusion rate will be introduced, with additional details to follow.
Lifetime Capital Gains Exemption
Under the income tax system, individuals benefit from a lifetime tax exemption on capital gains from the disposition of qualified small business corporation shares and eligible farm or fishing property. The Lifetime Capital Gains Exemption for 2024 stands at $1,016,836 and adjusts annually to account for inflation.
Starting June 25, 2024, the Lifetime Capital Gains Exemption will increase to $1.25 million.
Following this adjustment, the Lifetime Capital Gains Exemption will continue to be indexed to inflation.
Canadian Entrepreneur's Incentive
In Budget 2024, the government announced a new Canadian Entrepreneurs' Incentive to reduce the inclusion rate to 33.3 per cent on a lifetime maximum of $2 million in eligible capital gains.
When this incentive is fully rolled out, entrepreneurs will have a combined full and partial exemption of at least $3.25 million when selling all or part of a business. The incentive will result in a one-third inclusion rate, and the limit will increase by $200,000 each year, starting in 2025, until it reaches $2 million in 2034.
Flow-Through Shares
Flow-through shares enable resource firms to transfer tax expenses linked to their Canadian exploration endeavors to investors, who then deduct these expenses from their taxable income. The Mineral Exploration Tax Credit supplements this benefit for individuals investing in mining flow-through shares, supporting junior mining companies involved in grassroots mineral exploration. This credit, equal to 15% of specified mineral exploration expenses renounced to flow-through share investors, was set to expire on March 31, 2024.
Announced on March 28, the government plans to prolong eligibility for the Mineral Exploration Tax Credit by one year, covering flow-through share agreements executed on or before March 31, 2025.
To learn more about Flow Through Shares as an investment vehicle, contact TAAG Family Office for a complimentary discovery session.
Carbon Rebate for Small Business
Budget 2024 introduces the new Canada Carbon Rebate for Small Businesses, an automatic, refundable tax credit directly for eligible businesses. The tax credit would be available to a Canadian-controlled private corporation that files a tax return for its 2023 taxation year by July 15, 2024 and employs no more than 499 employees.
Home Buyers’ Plan
The Home Buyers’ Plan helps eligible home buyers to withdraw up to $35,000 from their RRSP to purchase or build their first home, or a home for a specified disabled individual, without having to pay tax on the withdrawal.
Budget 2024 proposes to increase the withdrawal limit from $35,000 to $60,000. It also proposes to temporarily defer the start of the 15-year repayment period by an additional three years for participants making a first withdrawal between January 1, 2022, and December 31, 2025. Accordingly, the 15-year repayment period would start the fifth year following the year in which a first withdrawal was made.
To learn more about how the 2024 Federal Budget affects your business or your family, contact our office today!
