Navigating Canada's Capital Gains Tax Change: What it Means for Real Estate

In a move to increase tax revenues from the wealthiest Canadians, the federal government is proposing a change to capital gains taxation that could have significant implications for real estate transactions across the country. The proposed change would increase the capital gains inclusion rate from 50 percent to 67 percent for individuals with more than $250,000 in capital gains in a year, affecting about 12 percent of Canada's corporations and Canadians with an average income of $1.42 million.

One of the key areas where this change will be felt is in the real estate market. Canadians selling properties such as vacation properties, secondary residences, rental properties, or properties bought for retirement planning could face higher taxes on their gains. This change comes at a time when many middle-class Canadians have seen significant appreciation in the value of their properties, especially in popular vacation areas.

For example, those who bought cottages before the COVID-19 pandemic, when prices were lower, may now face substantial tax bills if they sell these properties. This could lead to a rush to sell before the new tax rules take effect, especially considering the soaring values of properties in recent years.