The 2024 budget appears to be fairly benign on the surface. And for those who are getting started in life, there are some beneficial helps. For business owners and corporations, the new capital gains inclusion rate has items that we need to be paying attention to.
The inclusion rate for capital gains over $250,000 will now increase from one-half to two-thirds. However, this is only applicable to individual accounts. This can be managed for investment portfolios reasonably well.
⚠️ Clients with rental properties:The tax impact could be material especially for properties held in markets where significant appreciation has occurred.
Corporations and trusts inclusion rate will increase to two-thirds from the first dollar of capital gains.
⚠️ Corporations with triggered capital gains:The planning implications of this are material for corporations that have capital gains triggered after June 25th of 2024. Significant planning will be needed for those that have triggers.
There is a potential exclusion for entrepreneurial capital gains. These are capital gains on the sale of a business that is eligible for the lifetime capital gains exemption. A portion of the capital gain will be eligible for one-half inclusion rate. It starts at $200,000 and will increase by $200,000 per year up to $2,000,000 which will be reached in 2034.
👍 The federal budget includes an increase in the home buyers plan up from the current $35,000 to $60,000. The repayment period is proposed to be increased to 20 years: a five-year delay before repayment begins followed by a 15-year repayment period.
👍 The federal budget modified the alternative minimum tax so that charitable donations will reduce the alternative minimum tax by allowing 80% to be claimed instead of the original 50%. While this is an improvement, it still isn’t the 100% eligible that it was in 2023.
There are other items included in the budget that we won’t cover here. We wanted to highlight the budget items that most impact our clients. If you have further questions, feel free to reach out. We will be unpacking these items internally over the next while to build optimal planning solutions for you going forward.
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