You may have heard the words capital gains tax being thrown around a lot recently, and now Prime Minister Justin Trudeau is clarifying what it means.
On Monday, Trudeau released a video on X addressing recent headlines about the tax and setting the record straight on an upcoming increase to it as part of the government’s 2024 budget.
“This is a tax policy change that impacts less than one per cent of people but look at how much attention it’s getting,” Trudeau said at the beginning of the clip.
It’s time to change the capital gains tax. Here’s why: pic.twitter.com/a1X1z8rFTu
— Justin Trudeau (@JustinTrudeau) May 13, 2024
WHAT ARE THE CAPITAL GAINS TAX RATES?
As of June 25, up to $250,000 in capital gains will continue to be taxed at the current rate of 50 per cent. However, earnings over the quarter-of-a-million threshold will be charged at a two-thirds rate under the updated regulations.
WHAT ARE CAPITAL GAINS?
A capital gain is a profit made from the sale of property or an investment such as stocks, bonds, real estate, or other types of property.
WHO WILL BE IMPACTED BY THE CAPITAL GAINS TAX INCREASE?
Almost all Canadians will not be paying more tax as a result of the increase.
Starting June 25, those in Canada who make more than $250,000 annually in capital gains – about 0.13 per cent of the population – will see a change.
“These are people who have an average income of $1.4 million a year and are mostly in their 60s or older,” Trudeau said.
Furthermore, the capital gains tax does not apply to the sale of a primary residence, the home you usually inhabit.
So, if a person or couple were to sell the home they live in and make a profit, the sale would be exempt from capital gains tax.
However, if a person owned a secondary residence, such as a cottage or a rental property, and decided to sell it and made a profit, that sale would be subject to capital gains tax.
Trudeau said, “the very richest people are going to profit a little less off their assets,” when the new laws come into effect.
The capital gains tax increase will also apply to businesses and corporations.
CLEARING UP THE CONFUSION
The new tax increase means the amount of taxable income will increase to 67 per cent if a person/company makes a capital gain over $250,000. If their profit is under $250,000, they will continue to be taxed on only 50 per cent.
So, hypothetically, if a person were to make $1 million in capital gains in one year, 50 per cent of the first $250,000 would be taxable, and 67 per cent of the remaining $750,000 would be taxable.
INTENDED TO TARGET THE WEALTHIEST CANADIANS
Liberal MP Arielle Kayabaga for London West told Now Toronto that members of her constituency had misunderstood the meaning of the tax.
“People thought that if they make up to $250,000 they’re going to be taxed at 66 per cent. That’s not true,” she said.
“What it really is intended to do is to target the already 0.13 per cent of the population that already has the income to pay their fair share, to contribute to the fairness tax,” she continued.
The tax isn’t about targeting Canadians who make decent money, Kayabaga explained. “It’s not about taxing your home, it’s not about taxing your personal life…It’s about the gains,” meaning the extra sources of income people have.
Kayabaga also reiterated that the capital gains tax is a one-time tax, people are not going to be paying it on every day items, such as groceries, she assured.
The Liberals say the change will not affect the vast majority of Canadians, and project it to generate $20 billion in new revenue that they say will go towards the largest investment in housing in the country’s history, creating a national school food program, and providing prescription contraception and insulin for anyone who needs it.
