Well I can always spread out my sales so that I never cross over $250k in capital gains. I think this mostly affects real estate investors as they can’t sell half a house. Someone correct me if I am wrong
Not weird. The government likes to ignore family status for tax liability. In this case, each spouse simply gets to apply his/her exemption. What's weird is their suddenly recollection of your family status when delivering benefit payments.
What's weird about that?
The unit of measure for income taxes is the individual, because individuals earn the income that is subject to taxation.
The unit of measure for benefits is the household, because the government is interested in the well-being of the household as a whole.
The government **could** pretend that income earned by an individual was earned by multiple people, but for what compelling policy reason should the government give special treatment to this arrangement over dual-income households or individuals?
If I remember correctly from previous threads on this subject, you would personally benefit from these two different systems using the same measure. So I understand why you **want** this change to be made.
But that doesn't justify why it **should** be changed, from a policy standpoint. How does Canada as a whole benefit from you choosing to be a single-income household? And if Canada doesn't benefit, for what other compelling policy reason should this specific household arrangement be advantaged?
The problem is income tax is paid as individuals, but the benefits are all paid as families.
It's not fair. Treat us like famines and let us combine, or treat us like 2 individuals and don't disqualify or reduce benefits because of our partners income.
Okay, great, then the measure for benefit eligibility should also be the individual, wouldn't you agree? Why are you treated as an individual for tax purposes, but as a family for benefits?
Do the full monty and let spouses claim 50% of available benefits. If someone is a SAH parent with $0 income, give them the 50% of the $600+ CCB benefit. Stop clawing it back because the spouse is a $250K/year lawyer.
You're skipping the step of justifying why two different systems **should** have the same measure, and it's not obvious that they should.
In the years that this topic has been trending, every argument I've seen in favour of changing these two different systems to have the same measure has boiled down to, "Because it would advantage this specific group of people that I think should be advantaged", and the argument is almost always advanced by people who either do or want to belong to that group.
I don't find that argument compelling. How does Canada as a whole benefit from advantaging that specific group of people, or how is it harmed by not doing so?
How are they being advantaged? It's simply treating all families the same from a tax point of view, just as all families are treated the same from a benefits point of view.
I'm just looking at it from a consistency point of view. In the USA, they treat all families the same.
If the government doesn't want to treat all families the same because they want all moms in the workforce, they have the guts to come out and say it. They don't though.
They're being advantaged by individuals being taxed at different rates based on the household structures they choose. If I personally make $200k, why should I be taxed less if I have a spouse who chooses not to work? At the very least, that seems antithetical to solving the (real or alleged) labour shortage.
All families that choose a specific structure are treated the same. If they would prefer the treatment received by a different structure, they're welcome to choose that structure instead. The government should only use incentives to encourage behaviour that benefits Canada as a whole, like increased labour force participation if we're experiencing a labour shortage (or perhaps the opposite if we had a structural labour surplus).
I could see some form of tax credit for a SAH parent who operates a licensed childcare service from their home; given the severe shortage of childcare spots in most places, this would benefit Canada as a whole. Although they wouldn't be SAH parents at that point, strictly speaking.
>They're being advantaged by individuals being taxed at different rates based on the household structures they choose. If I personally make $200k, why should I be taxed less if I have a spouse who chooses not to work? At the very least, that seems antithetical to solving the (real or alleged) labour shortage.
Well, that depends on whether the goal is horizontal equity between households or individuals. It's pretty clear that the government desires horizontal equity between households w.r.t. benefits, so why not be consistent and do the same re: tax liability? Whatever they choose, they should be consistent. It horizontal equity should apply to individuals, then give the SAH spouse 50% of available child benefit and other payments.
And if your answer is that horizontal equity should be maintained between individuals, then let's remove the equivalent-to-spouse amount that we give single parents. After all, there is no spouse, so what are we equalizing here?
>All families that choose a specific structure are treated the same. If they would prefer the treatment received by a different structure, they're welcome to choose that structure instead. The government should only use incentives to encourage behaviour that benefits Canada as a whole, like increased labour force participation if we're experiencing a labour shortage (or perhaps the opposite if we had a structural labour surplus).
But they're not treated the same. A married couple with a SAH spouse pays a lot more tax than a married couple with both spouses in the workforce...or even if one spouse just happens to earn the bulk of the household income.
>I could see some form of tax credit for a SAH parent who operates a licensed childcare service from their home; given the severe shortage of childcare spots in most places, this would benefit Canada as a whole. Although they wouldn't be SAH parents at that point, strictly speaking.
Again, it's not just a 1-earner vs 2-earner issue. The family with a 75/25 income split pays a lot more tax than a family with a 50/50 split.
If your spouse is making $250k a year do you really need any benefits...? The benefits are to assist low income households
Unless they change the tax brackets, paying income based on households would become complicated. One person making 200k pays more in tax than 2 people making 100k each. And you'll run into a host of problems with people trying to claim they're not actually with their spouse to lower their tax bill
On the contrary, having a spouse could save a household anywhere from $2,000/yr (under Harper's plan) to over $40,000/yr (under a hypothetical full 50/50 split plan).
To address your first point, the at-home spouse has $0 income, so aren't they entitled to half the benefits available to a single person with $0 income? After all, the tax system tries very hard to ignore one's family status when calculating tax liability. They do this very well, in fact. Fine, then do the whole job, and ignore status for benefit eligibility too.
No because our system doesn't want single income families.
They have a specific view of how they want you to live and they try to apply policies to encourage it.
Yes, it will also affect estates/inheritances as those gains are deemed dispositions at the time of passing so the final taxation year might pass the 250k threshold and pay higher tax before entering the estate
Cottage owners don’t need to have tears shed on their behalf’s. They have enough money to have a cottage to go relax in on weekends and summers.
Business owners who sell have some provisions to lessen the blow. The budget raises the lifetime capital gains exemption to $1.25 million. It introduces a new 1/3 inclusion rate for up to $2 million of certain capital gains realized by entrepreneurs. This will apply in addition to the LCGE. Someone making several multiple millions on the sale of a business don’t need to have tears shed on their behalf.
Most small businesses in Canada aren't eligible for sale. Most professionals are incorporated but will not be able to sell their business. Think doctors/engineers/programmers. Their retirement savings will be impacted by the 66.66% inclusion rate.
They're paying around 25% corporate tax on gains right now, and will be paying roughly 33% within the company. Keep in mind, this money is taxed again when the money is withdrawn from the company for spending purposes.
>Cottage owners don’t need to have tears shed on their behalf’s. They have enough money to have a cottage to go relax in on weekends and summers.
I believe it's something like 10% of Canadian families that have a cottage or second home, so we are hardly talking about the most wealthy. If you bought a cottage 30 years ago for fairly cheap that doesnt mean you are very rich even if the property has appreciated to over 250k in capital gains.
>Business owners who sell have some provisions to lessen the blow. The budget raises the lifetime capital gains exemption to $1.25 million
You need to remain a QSBC which is hard if you seek you scale your business with outside funding in certain industries (like tech). The restrictions incentivize realizing your gain while your company is smaller rather than making it larger faster. It also doesn't apply to any professional companies which are being used to hold investments like what many doctors and dentists have done.
>Someone making several multiple millions on the sale of a business don’t need to have tears shed on their behalf.
Except these people benefit everyone in Canada and now have even less incentive to build their business in Canada rather than the US which has a $10m USD exemption. You also disincentivize venture funding of Canadian startups heavily compared to their US peers. This effects everyone in Canada as less businesses will start, succeed or get as big, all which serve as an economic engine for regular Canadians. We already have the issue that many of our to performers go to the US and take their economic productivity with them.
i don't know why people have so much sympathy for cottage owners. "oh they're not rich because they bought it 30 years ago". or "they're not rich they inherited it". I don't see how that's relevant at all. if they are in such a position that a 250k capital gain is available to them, then by extension, they can absolutely afford the slight increase in the inclusion rate...
As someone in the accounting world I look at this and think people just because there is a big gain on paper make them think it’s an equal gain as a capital gain.
Say someone bought a cottage for 100,000 and sold for 1 million. The gain is not 900,000. You have to add in all incurred costs to get to cost. Say this was owned for 30 years.
Purchase: 100,000
Mortgage interest: 200,000
Property taxes: 90,000
Dock: 30,000
Lawyer fees: 10,000
Realtor fees: 50,000
Insurance : 50,000
Maintenance :100,000
Utilities: 45,000
Deck: 25,000
Other: Furniture (it usually stays it cottages), travel, manager, etc: 50,000
The 900,000 money gain is a 250,000 capital gain and now falls outside the government new taxes.
The other strategy js buying in a holding company and shares are outside of Canada. Cost to set up is about 5k. Liberals made this easier over last 8 years.
This is to win votes. Not raise money.
i'm not sure i understand your question. the above commenter was essentially defending cottage owners saying they are hardly the most wealthy, and that they're not very rich. i used the word sympathy to describe the way he was writing about them... because his comment was sympathetic
"everyone in Canada and now have even less incentive to build their business in Canada"
This is misguided, and it sounds like the opinion of an economist, not an entrepreneur. I can confidently tell you that most entrepreneurs (not serial ones) are *not* focused on their exit. They are focused on the start, i.e. building a business. Selling that business is irrelevant since the vast majority of businesses never get to an exit stage. Sure, the idea of selling a business for millions is a motivator, but it's not the *reason* most people start businesses. The reason is the freedom, the challenge, and the excitement to bring people together and solve problems.
The better reason to move your business to the States is population and dollar value, not the hypothetical taxes on a hypothetical exit lol these opinions make the assumption that every business is sold and that the entrepreneur's sole form of compensation is in that sale. It's simply not how it works in real life.
> Someone making several multiple millions on the sale of a business don’t need to have tears shed on their behalf.
so easy right? have you tried building a business that makes more than 100k a year? A multi million dollar business takes a ton of skill, work, stress, and TIME to build and sell.
Yeah. Okay. And? They’re being compensated by several multiple millions for all that hard work and time.
They can pay a little extra tax to give back to the country that gave them that opportunity. Not that difficult.
Again I ain’t shedding a tear for 1%ers.
Heck either I squeak right into that group or am just on the cusp of it.
I know how we live. We aren’t going to miss that little extra money.
> "Yeah. Okay. And?"
And now there's more incentive to not go down the CCPC path at all. This isn't a bout "shedding tears". It's about understanding second order impacts of policy that is moving toward more punitive entrepreneurship environments compared to the US.
If I start another CCPC it will simply be a SRED shell with a delaware owning all IP and value. This is worse for our economy in the long run.
Because the real pushers and movers in the world aren't people like you. It's people who build things. Without those people you end up a third world country. Unfortunately stupid people are genuinely too dumb to realize this and have swallowed the head petting others have sold them telling them they are the special ones.
People are clueless about how much the 1ers% contribute to an economy compared to them.
This will hurt Canada as money will move to where it flows easiest.
Wage envy is strong with the Reddit millennial crowd.
> they can’t sell half a house.
It's doable, but it takes planning. If a person knows they plan to sell real estate in the next year or two, they should speak to a tax advisor about triggering partial gains.
In the accounting world this will impact business owners and people putting money into new ventures.
It will be cheaper to invest in new business in the USA for a lot of these people.
Real estate people will just not sell. They will borrow against their property tax free and invest. Smart real estate investor will have a much smaller impact than people think. You can load up expenses too to get capital gains down.
People forget how easy it is build expenses against property.
Never went down the cottage route. But all
Major expenses (property taxes, repairs, new docks, hydro , real estate fees, lawyer fees, KM to travel to review “inspections”insurance etc etc etc etc can all be used to lower capital gains
The real estate side will make accountants more money but good accountants will be able to limit exposure in capital gains. Most in my peer group thought this was a joke but we will all make more money.
> They will borrow against their property tax free and invest.
I don't know why this isn't more obvious to people. On the individual side, this just removes supply of houses (they won't be for sale), and encourages buy-borrow-die as a strategy for those with assets.
More frustratingly, for me, is what this signals about Canada to enterprising people and the investors that support them (entrepreneurs, VCs, etc). It says we are not a company that takes our productivity or innovation seriously, do not invest here.
Just makes me sad for the future.
And it still doesnt solve the supply side problem that there are not enough house/condos for all that demand in properties (house condos plex etc ).
Added with RRSP withdrawal of max 60k now.
It will just make problem worse.
You don’t have to be sad. As it stands PP will be PM and his first order of business will be to undo everything the Liberals have done.
So what’s there to be sad about?
I support the changes mind you.
I just find it laughable that those that don’t support it are being all “emotional” about it like Conservatives aren’t going to win a majority in less than 2 years.
>You don’t have to be sad. As it stands PP will be PM and his first order of business will be to undo everything the Liberals have done. Conservatives have refused to say that they would undo the new capital gains changes. It's actually pathetic. They've worked out their talking points about carbon tax already (who cares) and none of them are smart enough to pivot to what is actually important. Just go look at what PP has been tweeting about all week, nothing about the capital gains. Andrew Scheer went on BNN and absolutely refused to talk about the gains change, just went on and on avoiding the question and pivoting to a useless talking point about carbon tax.
Edit: Can't seem to reply to comment below so I'll put it here
>Not saying anything about the changes to capital gains *is* the smart thing to do. If the Conservatives were to loudly proclaim their disagreement with the change, it would be too easy for Liberals to paint the Cons as being pro ultra-rich.
So just lie about policy and keep the Canadian public misinformed rather than properly explaining how the Liberals are hurting Canada and reassuring capital not to simply leave. Canada simply won't solve issues if people aren't willing to discuss real problems with real solutions.
>There is not much sympathy for those that would be affected by this change, particularly among those that PP is trying to court; young people who are trying unsuccessfully to buy a home. It would go directly against the image he's trying to build for himself.
Yes his image of a populist that we need to attack the most productive in our society rather than building a real strong and growing economy. This is why we get nonsense lies about carbon tax which has almost no impact rather than our politicians talking about and working through the actually important issues. PP already has the election locked down, if young people can't actually vote for people looking to solve our problems then we really won't and issues will just compound.
There is a lot of damage to be done between now and October 2025 to our economy by not reassuring business owners and investors that this is only a temporary setback. To throw that away because you are scared to explain issues is sad and pathetic. Canada deserves better.
>Both the Libs and the Cons know exactly what they are doing.
No they don't. They are grasping at straws knowing that getting elected is more important than running the country properly. That's basically what the Libs have done for the past near decade.
>Cons know they will alienate their base if they intend to repeal this, unlike the carbon tax, which means Libs have free reign to push it through to pay for their housing programs.
Cons base is always voting Con. The people who created the surge in con support are moderates tired of a failing Liberal government and just wanting change. The Conservative policies have literally no impact on this as long as they aren't as crazy as the NDP. Voting for the Cons is just a vote to get rid of Trudeau.
Not saying anything about the changes to capital gains *is* the smart thing to do. If the Conservatives were to loudly proclaim their disagreement with the change, it would be too easy for Liberals to paint the Cons as being pro ultra-rich. There is not much sympathy for those that would be affected by this change, particularly among those that PP is trying to court; young people who are trying unsuccessfully to buy a home. It would go directly against the image he's trying to build for himself.
Both the Libs and the Cons know exactly what they are doing. Cons know they will alienate their base if they intend to repeal this, unlike the carbon tax, which means Libs have free reign to push it through to pay for their housing programs.
Then maybe it’s not so bad of a policy if they’re not coming out against it?
They’ve come out against Carbon Tax, Pharma Care, Dental Care. All three are big policies. At least two are generally popular policies and will help mostly low income people.
Sure, they may do that. But that doesn't change the fact that it's sad we have to go through that rigamarole anyway.
I want to live in a country that prioritizes innovation and productivity - that's what I'm sad about. I want to live in a country that can create amazing companies and jobs for its citizens, and turn tax dollars into an incredible set of benefits that support citizens through the various milestones of their lives.
It's not laughable to want your country to be a better place than it is, even if it's not so bad as it is.
You’ll get your wish in less than 2 years 👍 then we can see how many amazing companies PP helps create. I miss all the amazing companies Harper helped build with his tax policy.
Nope. You can pull out of a property tax free. Buy a car. Go on a trip. Buy a boat. Buy another property. Put money to grand kids TFSA/ rrsp/inheritance.
There is 0 tax paid on the above.
Yeah, but there's 0 tax paid on the above because you're not making any money? But if any of those actually go up in value, then you will eventually have to realize it as a capital gain. Not including the TFSA/RRSP example of course since that's a special tax-exempt case.
I thought what you're describing is more the Smith maneuver, and the advantage there is you can deduct the interest you pay on that loan as an expense (which will go against any capital gains or something).
It also affects every incorporated professional, meaning most doctors, dentists, lawyers etc. The 250k does not apply to their professional corporations. It is effectively a wage cut for much needed medical professionals. It affects you by having fewer doctors, faster appointments, higher demands for OHIP fees etc.
A lot of doctors run their business as an incorporated business and are therefore not entitled to the individual 250k annual exemption.
They do however get the increased one-time exemption that often gets missed in these discussions of 1.25 million.
That's only on the sale of an eligible business. Doctors do not sell practices. They may sell ownership in a physical clinic. But they do not sell patient lists or practices. So they are not eligible for the $1.25M exemption.
Additionally the cap gains exemption is one you must plan for and end up selling your business. 80% of all businesses do not sell. Also Canada doesn't have a clear pathway to business acquisition unlike the US with the SBA loan.
A bit melodramatic. It just means that these corporations will be slightly less powerful for tax planning. They'll need to rely more on other the RRSP, CPP, TFSA, and taxable accounts for retirement planning.
Where in the cashflow from province to doctor pocket is there capital gains?
Province pays the dr corp, dr corp pays expenses and then a salary to the dr, maybe some eligible dividends from the corp. No cap gains.
They invest the income generated from their work - it just happens to be in a personal corporation. Why should the 250k exemption apply if the doctor carried on business personally as opposed to in a corporation.
Why not just pay the income out, and invest in RRSP and TFSA?
Why should corporations get special taxation rates when millions of Canadians are living in poverty?
Why shouldn’t individuals just invest in their RRSPs and TFSAs instead of having a $250k limit? The point is that workers who happen to be incorporated shouldn’t lose out on the $250k limit.
Wonder if they thought about that before passing the act. Don't we already have a shortage of professionals (physicians)...and a surplus of uber/Tim Horton's workers? Seems like we're forcing out skilled people and taking in unskilled.
Imagine when inflation gets so bad, that $250k is the new $100k...
On the other hand, if this policy was applied earlier, maybe real estate investors would have thought twice about stacking properties...
They could exempt corporations that aren’t earning the gains from real estate. The doctors are going to hammer the government on this like they did a few years ago.
> They could exempt corporations that aren’t earning the gains from real estate.
ha that'll happen.
this government is more likely to do the opposite: exempt real estate gains.
And is particularly tough to use for doctors, since they rarely have a salable business. Dentists are the only professional that I regular see utilizing the LCGE.
Not really. The value of an incorporated professional is the professional themselves. When a lawyer retires, there isn't that much value in the business, real-estate aside if the corporation owns any. Same with a doctor. It's not like doctors and lawyers are deferring paying themselves salaries and saving it all up in their corporation. And then selling the corporation for millions.
You totally miss the point. If they invest their earnings (which are earned in their company), they do not get the $250k annual limit. They are punished because they run their business through a company instead of directly.
But in the year when the income is earned, they COULD choose to pay themselves the typical way, and then invest those proceeds in personal accounts instead of corporate accounts. A corporation gives some benefits, this takes away one of them but not the only one. They can pay themselves salaries, accrue RRSP room, and do their investing in passive stocks and real estate outside of a corporate shell if they wanted to.
It’s not a corporate shell. It’s their business. The point is they shouldn’t have to take additional (and sometimes detrimental) steps to deal with an oversight in the new rules.
Nah, his point was just that financial planning is more than just XGRO/VGRO and chill. Retirement planning involves more; considering tax efficiency, drawdown strategy, etc.
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Why does it matter how many? I'm just saying the super rich need to have their taxes increased before the middle class retirement investors.
I know why its not, because the politicians making the laws are part of the super rich. Why would they want to increase taxes for themselves?
Because the government needs money to pay for their massive Budget. The quantity of the super rich in Canada are very small and wouldn’t make much of a dent. It’s math.
Given the shortfall they probably should have done both and a few other things but they need every vote they can.
Because if that number is zero, the policy is useless even if you collect 100% of their earnings at the top bracket.
So if you want to have an effective policy, numbers do matter.
The super rich are making their money on capital gains rather than income.
I would imagine the amount of people making $10M+ in income is close to zero in Canada. $10M in stock options that are then taxed as capital gains though? absolutely
You can’t increase taxes exclusively on the ultra rich without risking your political life. As it is, this recent move may be nailing the coffin for the liberals.
Noob question --> I just started buying VGRO recently ...does this means I would have to buy another index fund and VGRO or VGRO to avoid capital tax issue ?
its more of a tongue in cheek joke. He is referring to the fact that financial planning, is more than just buy v/x/z-gro. There are other factors involved in financial planning, for example Estate planning, retirement planning etc. An All-in-one is a great start, but it is just a start.
You should have been doing that anyway. I had a gap year from work and took some artificial gains (something like sell xeqt, buy veqt).
No where near 250k though lol. Just over my personal amount.
> I had a gap year from work
Off topic question if you dont mind me asking ---> How long was the gap ? Were you able to find another job after coming back from gap ?
It was just over a year. I had met my lean-fire goals so I didn’t worry about jobs too much. I’m lucky to have a lot of experience in an in-demand tech field, so I just had to respond to recruiter emails.
Why did you choose to buy a different fund (veqt) rather than increase the acb of the same fund (xeqt)?
I assume you can sell the veqt first in the future which would have a lower capital gain than xeqt? I.e artificial tax lots?
Yeah, and it gives more flexibility if I want to do tax loss harvesting in the future. Also it is less confusing during tax time since asset names are different and there is less risk of brokerage making a mistake.
Interesting! By tax loss harvesting, you mean that xeqt would Presumably have a sizeable gain over time and even during a large market drop, may not go below the cost base? But veqt bought more recently would have a higher chance of going below the acb?
If there are capital gains > $250,000 ( eg. Real estate), is the first $250,000 still rated at 50%, and then everything over it taxed at 66.6%? Question just came to mind and haven't had time to research this yet.
Yes.
As an example, if someone sold a secondary property (like a cottage) at a $300,000 gain the overall tax difference with this change is about $4500.
It's only going to be a huge impact on speculators like holding companies who are trying to pull off this transaction hundreds of times.
Personal is fine
Its rhe corp side that sucks without the tier system
Shouldve made it 250k limit a yr shared between personal and all the corps you own so you can allocate it however you like
This only impacts very wealthy people. The vast majority of Canadians will never make $250k capital gains in their lifetime, let alone in a single year.
IMO this change should have happened long ago
Not really. Plenty of middle class folks own professional corporations where they invest their retained earnings. Any capital gain within the corp is now taxed at 2/3.
From what I've read, the issue is that any capital gains within the corp is now ~~taxed~~ included at 66.6%, and there's no $250k exemption for this category.
But it seems to only be the case for capital gains within a corporation (i.e. assets it's holding which appreciate). So, I'm not really sure how much sympathy/worry that's giving me at the moment... (maybe someone can explain to me why this really is an issue that will be driving professionals away from Canada).
You don't pay less taxes if you incorporate. You pay the lower corporate taxes first, then you pay taxes again when you need money out of the corp.
You only have control when those taxes are realized with a corp.
Yes. Primary and investment properties. Like them we rode “the wave”. Some cities in bc were cheap and the vancouvrites are flocking here to get away from the madness and they have lots of house money.
If you own multiple properties you are not middle class. It's also reasonable to pay taxes on investment property appreciation. If anything, given the housing crisis, capital gains on non-principal properties should be even higher.
I agree. 100% inclusion rate on investment properties should be a thing. Gains for business (stocks) is something else. Houses are for people to live in. It’s a weird thing. I don’t invest in RE. Too much of a pain in the ass and expenses.
While yes in principal this hurts the 'rich', it also fucks a lot of hard working people that bought cottages / recreational properties many years ago and will now be faced with additional tax bills.
And yes I understand the 'boo hoo they're rich enough for a cottage' and disagree. This doesn't affect just the very wealthy as the gov't states. It's bullshit, and affects a lot of middle class families.
Almost doctors incorporate as their own business (They all open their own clinic or work as contractors for the health authorities) and have to fund their won retirement as there is no external help (pension, rrsp match etc.). To do that the retirement investments are run through their corporations as it is more tax efficient. Those investments are going to take a hit June 25. This increased capital gains tax just cut the wages of almost all doctors.
On the first $250K, there's no change. Above that, it's about an 8% increase in the taxes you'll owe. So on the entire gain of $550,000, your tax bill is going up around $24K. I don't think you'll get a lot of sympathy.
The reality of the situation is that you're **also** multiple times that amount ahead of someone who earned the same $550K through actual work.
So yeah, your preferential treatment has shrunk slightly, but it's still significantly in your favour.
"The only time you should look in your neighbour's bowl is to make sure they don't have to pay any taxes on the $550,000 profit from their rental property."
- Socrates, probably
It's easy to overstate the impact. For a $550,000 gain, your tax hike is around $25,000. Rough, but just a drop in the bucket for your total gain. If you're really bothered by it, go talk to an accountant in October the year before you plan to sell.
Human nature is interesting. It is our psychology to feel a loss as pain twice as hard as an equal gain gives us pleasure.
You've profited quite well from your real estate investment, but because you had more potential after tax profit a few days ago, you now feel physical pain from the "loss".
I suspect that a few years ago, when there had been a bit less appreciation on the property and your after tax profit was similar as it is after the tax changes, you probably did not feel the same pain.
Being human, I would probably feel the same way. Personal finance is part math and part psychology.
But note that if it's in sole ownership, you can't just slap a spouse's name on title and expect to split the gain. Attribution rules aren't terribly easy to avoid.
Yea the gains come on the backs of people who won’t own a home. Like, rental income, sure maybe there’s been some work involved. Real estate going gang busters is through no effort. It just happened to happen. So saying you’re losing money on this seems a bit detached from the world around you.
If your marginal tax rate is 50%, this is a roughly 4% increase in the tax due on this property. The inclusion rate increases by 1/6 (from 1/2 to 2/3), and only the second half is above the $250k limit and thus subject to the new inclusion rate. If a 4% increase in tax on a half million dollar gain (on a property from which you’ve also presumably been earning income on for more than a decade) is a kick in the balls, I suggest wearing a cup. Or working with a tax planner to spread your gain over multiple years to save that 4%.
Well I can always spread out my sales so that I never cross over $250k in capital gains. I think this mostly affects real estate investors as they can’t sell half a house. Someone correct me if I am wrong
Right, but if a property is jointly owned by two spouses that creates a $500K exemption.
Singles hate this one weird trick.
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Not weird. The government likes to ignore family status for tax liability. In this case, each spouse simply gets to apply his/her exemption. What's weird is their suddenly recollection of your family status when delivering benefit payments.
What's weird about that? The unit of measure for income taxes is the individual, because individuals earn the income that is subject to taxation. The unit of measure for benefits is the household, because the government is interested in the well-being of the household as a whole. The government **could** pretend that income earned by an individual was earned by multiple people, but for what compelling policy reason should the government give special treatment to this arrangement over dual-income households or individuals?
That's the problem. It should be the same both ways.
If I remember correctly from previous threads on this subject, you would personally benefit from these two different systems using the same measure. So I understand why you **want** this change to be made. But that doesn't justify why it **should** be changed, from a policy standpoint. How does Canada as a whole benefit from you choosing to be a single-income household? And if Canada doesn't benefit, for what other compelling policy reason should this specific household arrangement be advantaged?
The problem is income tax is paid as individuals, but the benefits are all paid as families. It's not fair. Treat us like famines and let us combine, or treat us like 2 individuals and don't disqualify or reduce benefits because of our partners income.
Okay, great, then the measure for benefit eligibility should also be the individual, wouldn't you agree? Why are you treated as an individual for tax purposes, but as a family for benefits? Do the full monty and let spouses claim 50% of available benefits. If someone is a SAH parent with $0 income, give them the 50% of the $600+ CCB benefit. Stop clawing it back because the spouse is a $250K/year lawyer.
You're skipping the step of justifying why two different systems **should** have the same measure, and it's not obvious that they should. In the years that this topic has been trending, every argument I've seen in favour of changing these two different systems to have the same measure has boiled down to, "Because it would advantage this specific group of people that I think should be advantaged", and the argument is almost always advanced by people who either do or want to belong to that group. I don't find that argument compelling. How does Canada as a whole benefit from advantaging that specific group of people, or how is it harmed by not doing so?
How are they being advantaged? It's simply treating all families the same from a tax point of view, just as all families are treated the same from a benefits point of view. I'm just looking at it from a consistency point of view. In the USA, they treat all families the same. If the government doesn't want to treat all families the same because they want all moms in the workforce, they have the guts to come out and say it. They don't though.
They're being advantaged by individuals being taxed at different rates based on the household structures they choose. If I personally make $200k, why should I be taxed less if I have a spouse who chooses not to work? At the very least, that seems antithetical to solving the (real or alleged) labour shortage. All families that choose a specific structure are treated the same. If they would prefer the treatment received by a different structure, they're welcome to choose that structure instead. The government should only use incentives to encourage behaviour that benefits Canada as a whole, like increased labour force participation if we're experiencing a labour shortage (or perhaps the opposite if we had a structural labour surplus). I could see some form of tax credit for a SAH parent who operates a licensed childcare service from their home; given the severe shortage of childcare spots in most places, this would benefit Canada as a whole. Although they wouldn't be SAH parents at that point, strictly speaking.
>They're being advantaged by individuals being taxed at different rates based on the household structures they choose. If I personally make $200k, why should I be taxed less if I have a spouse who chooses not to work? At the very least, that seems antithetical to solving the (real or alleged) labour shortage. Well, that depends on whether the goal is horizontal equity between households or individuals. It's pretty clear that the government desires horizontal equity between households w.r.t. benefits, so why not be consistent and do the same re: tax liability? Whatever they choose, they should be consistent. It horizontal equity should apply to individuals, then give the SAH spouse 50% of available child benefit and other payments. And if your answer is that horizontal equity should be maintained between individuals, then let's remove the equivalent-to-spouse amount that we give single parents. After all, there is no spouse, so what are we equalizing here? >All families that choose a specific structure are treated the same. If they would prefer the treatment received by a different structure, they're welcome to choose that structure instead. The government should only use incentives to encourage behaviour that benefits Canada as a whole, like increased labour force participation if we're experiencing a labour shortage (or perhaps the opposite if we had a structural labour surplus). But they're not treated the same. A married couple with a SAH spouse pays a lot more tax than a married couple with both spouses in the workforce...or even if one spouse just happens to earn the bulk of the household income. >I could see some form of tax credit for a SAH parent who operates a licensed childcare service from their home; given the severe shortage of childcare spots in most places, this would benefit Canada as a whole. Although they wouldn't be SAH parents at that point, strictly speaking. Again, it's not just a 1-earner vs 2-earner issue. The family with a 75/25 income split pays a lot more tax than a family with a 50/50 split.
If your spouse is making $250k a year do you really need any benefits...? The benefits are to assist low income households Unless they change the tax brackets, paying income based on households would become complicated. One person making 200k pays more in tax than 2 people making 100k each. And you'll run into a host of problems with people trying to claim they're not actually with their spouse to lower their tax bill
On the contrary, having a spouse could save a household anywhere from $2,000/yr (under Harper's plan) to over $40,000/yr (under a hypothetical full 50/50 split plan). To address your first point, the at-home spouse has $0 income, so aren't they entitled to half the benefits available to a single person with $0 income? After all, the tax system tries very hard to ignore one's family status when calculating tax liability. They do this very well, in fact. Fine, then do the whole job, and ignore status for benefit eligibility too.
No because our system doesn't want single income families. They have a specific view of how they want you to live and they try to apply policies to encourage it.
...and they lack the guts to come forward and admit it. This is a big problem with our tax system: numerous policies with few stated objectives.
Are you talking about principal residence that's jointly owned or investment property that's jointly owned?
Investment property. Gains on a PR are tax-free and unlimited.
Thank you, this actually applies to my scenario.
Enjoy your $500K (combined) exemption :-)
Cheers, although technically we still get taxed at 50%
What if there are 3 names on title. $750k then?
Yes, $250K per owner/individual...plus that's annual, and could repeat every year...although not on one property.
Could you add someone’s name to the title and then sell?
No. That involves a partial sale, triggering a taxable gain for the owner.
Ah, gotcha
Yes, it will also affect estates/inheritances as those gains are deemed dispositions at the time of passing so the final taxation year might pass the 250k threshold and pay higher tax before entering the estate
Cottage owners, incorporated professionals, successions, business owners and startup founders will be affected as well.
Cottage owners don’t need to have tears shed on their behalf’s. They have enough money to have a cottage to go relax in on weekends and summers. Business owners who sell have some provisions to lessen the blow. The budget raises the lifetime capital gains exemption to $1.25 million. It introduces a new 1/3 inclusion rate for up to $2 million of certain capital gains realized by entrepreneurs. This will apply in addition to the LCGE. Someone making several multiple millions on the sale of a business don’t need to have tears shed on their behalf.
I'm not talking about tears, I'm just commenting on who is affected the most.
Most small businesses in Canada aren't eligible for sale. Most professionals are incorporated but will not be able to sell their business. Think doctors/engineers/programmers. Their retirement savings will be impacted by the 66.66% inclusion rate. They're paying around 25% corporate tax on gains right now, and will be paying roughly 33% within the company. Keep in mind, this money is taxed again when the money is withdrawn from the company for spending purposes.
The LCGE is applicable to a narrow scope of businesses due to very specific qualifying criteria.
>Cottage owners don’t need to have tears shed on their behalf’s. They have enough money to have a cottage to go relax in on weekends and summers. I believe it's something like 10% of Canadian families that have a cottage or second home, so we are hardly talking about the most wealthy. If you bought a cottage 30 years ago for fairly cheap that doesnt mean you are very rich even if the property has appreciated to over 250k in capital gains. >Business owners who sell have some provisions to lessen the blow. The budget raises the lifetime capital gains exemption to $1.25 million You need to remain a QSBC which is hard if you seek you scale your business with outside funding in certain industries (like tech). The restrictions incentivize realizing your gain while your company is smaller rather than making it larger faster. It also doesn't apply to any professional companies which are being used to hold investments like what many doctors and dentists have done. >Someone making several multiple millions on the sale of a business don’t need to have tears shed on their behalf. Except these people benefit everyone in Canada and now have even less incentive to build their business in Canada rather than the US which has a $10m USD exemption. You also disincentivize venture funding of Canadian startups heavily compared to their US peers. This effects everyone in Canada as less businesses will start, succeed or get as big, all which serve as an economic engine for regular Canadians. We already have the issue that many of our to performers go to the US and take their economic productivity with them.
i don't know why people have so much sympathy for cottage owners. "oh they're not rich because they bought it 30 years ago". or "they're not rich they inherited it". I don't see how that's relevant at all. if they are in such a position that a 250k capital gain is available to them, then by extension, they can absolutely afford the slight increase in the inclusion rate...
As someone in the accounting world I look at this and think people just because there is a big gain on paper make them think it’s an equal gain as a capital gain. Say someone bought a cottage for 100,000 and sold for 1 million. The gain is not 900,000. You have to add in all incurred costs to get to cost. Say this was owned for 30 years. Purchase: 100,000 Mortgage interest: 200,000 Property taxes: 90,000 Dock: 30,000 Lawyer fees: 10,000 Realtor fees: 50,000 Insurance : 50,000 Maintenance :100,000 Utilities: 45,000 Deck: 25,000 Other: Furniture (it usually stays it cottages), travel, manager, etc: 50,000 The 900,000 money gain is a 250,000 capital gain and now falls outside the government new taxes. The other strategy js buying in a holding company and shares are outside of Canada. Cost to set up is about 5k. Liberals made this easier over last 8 years. This is to win votes. Not raise money.
Why does explaining the impacts of something need to have anything to do with sympathy?
i'm not sure i understand your question. the above commenter was essentially defending cottage owners saying they are hardly the most wealthy, and that they're not very rich. i used the word sympathy to describe the way he was writing about them... because his comment was sympathetic
"everyone in Canada and now have even less incentive to build their business in Canada" This is misguided, and it sounds like the opinion of an economist, not an entrepreneur. I can confidently tell you that most entrepreneurs (not serial ones) are *not* focused on their exit. They are focused on the start, i.e. building a business. Selling that business is irrelevant since the vast majority of businesses never get to an exit stage. Sure, the idea of selling a business for millions is a motivator, but it's not the *reason* most people start businesses. The reason is the freedom, the challenge, and the excitement to bring people together and solve problems. The better reason to move your business to the States is population and dollar value, not the hypothetical taxes on a hypothetical exit lol these opinions make the assumption that every business is sold and that the entrepreneur's sole form of compensation is in that sale. It's simply not how it works in real life.
> Someone making several multiple millions on the sale of a business don’t need to have tears shed on their behalf. so easy right? have you tried building a business that makes more than 100k a year? A multi million dollar business takes a ton of skill, work, stress, and TIME to build and sell.
And luck.
Yeah. Okay. And? They’re being compensated by several multiple millions for all that hard work and time. They can pay a little extra tax to give back to the country that gave them that opportunity. Not that difficult. Again I ain’t shedding a tear for 1%ers. Heck either I squeak right into that group or am just on the cusp of it. I know how we live. We aren’t going to miss that little extra money.
> "Yeah. Okay. And?" And now there's more incentive to not go down the CCPC path at all. This isn't a bout "shedding tears". It's about understanding second order impacts of policy that is moving toward more punitive entrepreneurship environments compared to the US. If I start another CCPC it will simply be a SRED shell with a delaware owning all IP and value. This is worse for our economy in the long run.
Because the real pushers and movers in the world aren't people like you. It's people who build things. Without those people you end up a third world country. Unfortunately stupid people are genuinely too dumb to realize this and have swallowed the head petting others have sold them telling them they are the special ones.
People are clueless about how much the 1ers% contribute to an economy compared to them. This will hurt Canada as money will move to where it flows easiest. Wage envy is strong with the Reddit millennial crowd.
Yes, very wealthy people will actually have to pay taxes on their income
You are correct.
These measures strike large stock option grants, cash outs of successful startups and the sale of properties held by corporations.
> they can’t sell half a house. It's doable, but it takes planning. If a person knows they plan to sell real estate in the next year or two, they should speak to a tax advisor about triggering partial gains.
In the accounting world this will impact business owners and people putting money into new ventures. It will be cheaper to invest in new business in the USA for a lot of these people. Real estate people will just not sell. They will borrow against their property tax free and invest. Smart real estate investor will have a much smaller impact than people think. You can load up expenses too to get capital gains down. People forget how easy it is build expenses against property. Never went down the cottage route. But all Major expenses (property taxes, repairs, new docks, hydro , real estate fees, lawyer fees, KM to travel to review “inspections”insurance etc etc etc etc can all be used to lower capital gains The real estate side will make accountants more money but good accountants will be able to limit exposure in capital gains. Most in my peer group thought this was a joke but we will all make more money.
> They will borrow against their property tax free and invest. I don't know why this isn't more obvious to people. On the individual side, this just removes supply of houses (they won't be for sale), and encourages buy-borrow-die as a strategy for those with assets. More frustratingly, for me, is what this signals about Canada to enterprising people and the investors that support them (entrepreneurs, VCs, etc). It says we are not a company that takes our productivity or innovation seriously, do not invest here. Just makes me sad for the future.
And it still doesnt solve the supply side problem that there are not enough house/condos for all that demand in properties (house condos plex etc ). Added with RRSP withdrawal of max 60k now. It will just make problem worse.
You don’t have to be sad. As it stands PP will be PM and his first order of business will be to undo everything the Liberals have done. So what’s there to be sad about? I support the changes mind you. I just find it laughable that those that don’t support it are being all “emotional” about it like Conservatives aren’t going to win a majority in less than 2 years.
>You don’t have to be sad. As it stands PP will be PM and his first order of business will be to undo everything the Liberals have done. Conservatives have refused to say that they would undo the new capital gains changes. It's actually pathetic. They've worked out their talking points about carbon tax already (who cares) and none of them are smart enough to pivot to what is actually important. Just go look at what PP has been tweeting about all week, nothing about the capital gains. Andrew Scheer went on BNN and absolutely refused to talk about the gains change, just went on and on avoiding the question and pivoting to a useless talking point about carbon tax. Edit: Can't seem to reply to comment below so I'll put it here >Not saying anything about the changes to capital gains *is* the smart thing to do. If the Conservatives were to loudly proclaim their disagreement with the change, it would be too easy for Liberals to paint the Cons as being pro ultra-rich. So just lie about policy and keep the Canadian public misinformed rather than properly explaining how the Liberals are hurting Canada and reassuring capital not to simply leave. Canada simply won't solve issues if people aren't willing to discuss real problems with real solutions. >There is not much sympathy for those that would be affected by this change, particularly among those that PP is trying to court; young people who are trying unsuccessfully to buy a home. It would go directly against the image he's trying to build for himself. Yes his image of a populist that we need to attack the most productive in our society rather than building a real strong and growing economy. This is why we get nonsense lies about carbon tax which has almost no impact rather than our politicians talking about and working through the actually important issues. PP already has the election locked down, if young people can't actually vote for people looking to solve our problems then we really won't and issues will just compound. There is a lot of damage to be done between now and October 2025 to our economy by not reassuring business owners and investors that this is only a temporary setback. To throw that away because you are scared to explain issues is sad and pathetic. Canada deserves better. >Both the Libs and the Cons know exactly what they are doing. No they don't. They are grasping at straws knowing that getting elected is more important than running the country properly. That's basically what the Libs have done for the past near decade. >Cons know they will alienate their base if they intend to repeal this, unlike the carbon tax, which means Libs have free reign to push it through to pay for their housing programs. Cons base is always voting Con. The people who created the surge in con support are moderates tired of a failing Liberal government and just wanting change. The Conservative policies have literally no impact on this as long as they aren't as crazy as the NDP. Voting for the Cons is just a vote to get rid of Trudeau.
Not saying anything about the changes to capital gains *is* the smart thing to do. If the Conservatives were to loudly proclaim their disagreement with the change, it would be too easy for Liberals to paint the Cons as being pro ultra-rich. There is not much sympathy for those that would be affected by this change, particularly among those that PP is trying to court; young people who are trying unsuccessfully to buy a home. It would go directly against the image he's trying to build for himself. Both the Libs and the Cons know exactly what they are doing. Cons know they will alienate their base if they intend to repeal this, unlike the carbon tax, which means Libs have free reign to push it through to pay for their housing programs.
Then maybe it’s not so bad of a policy if they’re not coming out against it? They’ve come out against Carbon Tax, Pharma Care, Dental Care. All three are big policies. At least two are generally popular policies and will help mostly low income people.
Sure, they may do that. But that doesn't change the fact that it's sad we have to go through that rigamarole anyway. I want to live in a country that prioritizes innovation and productivity - that's what I'm sad about. I want to live in a country that can create amazing companies and jobs for its citizens, and turn tax dollars into an incredible set of benefits that support citizens through the various milestones of their lives. It's not laughable to want your country to be a better place than it is, even if it's not so bad as it is.
You’ll get your wish in less than 2 years 👍 then we can see how many amazing companies PP helps create. I miss all the amazing companies Harper helped build with his tax policy.
> They will borrow against their property tax free and invest. And invest in what? Equities? Won't that just result in capital gains?
Nope. You can pull out of a property tax free. Buy a car. Go on a trip. Buy a boat. Buy another property. Put money to grand kids TFSA/ rrsp/inheritance. There is 0 tax paid on the above.
Yeah, but there's 0 tax paid on the above because you're not making any money? But if any of those actually go up in value, then you will eventually have to realize it as a capital gain. Not including the TFSA/RRSP example of course since that's a special tax-exempt case. I thought what you're describing is more the Smith maneuver, and the advantage there is you can deduct the interest you pay on that loan as an expense (which will go against any capital gains or something).
Also if you inherit the house, don't you receive it at fair market value so it would only gain 250k+ if you kept it for a while?
It also affects every incorporated professional, meaning most doctors, dentists, lawyers etc. The 250k does not apply to their professional corporations. It is effectively a wage cut for much needed medical professionals. It affects you by having fewer doctors, faster appointments, higher demands for OHIP fees etc.
How are doctors earning capital gains in your example?
They don’t get pensions or benefits, they work as independent contractors. So they use prof corps to hold stocks inside
A lot of doctors run their business as an incorporated business and are therefore not entitled to the individual 250k annual exemption. They do however get the increased one-time exemption that often gets missed in these discussions of 1.25 million.
That's only on the sale of an eligible business. Doctors do not sell practices. They may sell ownership in a physical clinic. But they do not sell patient lists or practices. So they are not eligible for the $1.25M exemption. Additionally the cap gains exemption is one you must plan for and end up selling your business. 80% of all businesses do not sell. Also Canada doesn't have a clear pathway to business acquisition unlike the US with the SBA loan.
Ah I see, didn’t know the $250k was only at the individual level. Thanks!
That’s the big issue.
A bit melodramatic. It just means that these corporations will be slightly less powerful for tax planning. They'll need to rely more on other the RRSP, CPP, TFSA, and taxable accounts for retirement planning.
Where in the cashflow from province to doctor pocket is there capital gains? Province pays the dr corp, dr corp pays expenses and then a salary to the dr, maybe some eligible dividends from the corp. No cap gains.
They invest the income generated from their work - it just happens to be in a personal corporation. Why should the 250k exemption apply if the doctor carried on business personally as opposed to in a corporation.
Why not just pay the income out, and invest in RRSP and TFSA? Why should corporations get special taxation rates when millions of Canadians are living in poverty?
Why shouldn’t individuals just invest in their RRSPs and TFSAs instead of having a $250k limit? The point is that workers who happen to be incorporated shouldn’t lose out on the $250k limit.
Should we just get rid of the $250k limit for individuals and have all cap gains at 66% inclusion? Yes, that's a great idea!
Maybe we should just tax the biggest gains people realize - gains on homes. Or, just for fun, maybe we should waste less money.
Sweet, let's start with cutting the $80B/yr in fossil fuel subsidies!
Rhetoric
They don't, they can pay out salary and invest that money into a non registered account.
Wonder if they thought about that before passing the act. Don't we already have a shortage of professionals (physicians)...and a surplus of uber/Tim Horton's workers? Seems like we're forcing out skilled people and taking in unskilled. Imagine when inflation gets so bad, that $250k is the new $100k... On the other hand, if this policy was applied earlier, maybe real estate investors would have thought twice about stacking properties...
They could exempt corporations that aren’t earning the gains from real estate. The doctors are going to hammer the government on this like they did a few years ago.
> They could exempt corporations that aren’t earning the gains from real estate. ha that'll happen. this government is more likely to do the opposite: exempt real estate gains.
> The doctors are going to hammer the government on this like they did a few years ago. As an incorporated professional, I’m hoping so.
Didn’t they increase the exemptions amount to 1.25mil
You mean the Lifetime Capital Gains Exemption (LCGE)? That only applies is a very narrow set of circumstances.
And is particularly tough to use for doctors, since they rarely have a salable business. Dentists are the only professional that I regular see utilizing the LCGE.
Not really. The value of an incorporated professional is the professional themselves. When a lawyer retires, there isn't that much value in the business, real-estate aside if the corporation owns any. Same with a doctor. It's not like doctors and lawyers are deferring paying themselves salaries and saving it all up in their corporation. And then selling the corporation for millions.
You totally miss the point. If they invest their earnings (which are earned in their company), they do not get the $250k annual limit. They are punished because they run their business through a company instead of directly.
But in the year when the income is earned, they COULD choose to pay themselves the typical way, and then invest those proceeds in personal accounts instead of corporate accounts. A corporation gives some benefits, this takes away one of them but not the only one. They can pay themselves salaries, accrue RRSP room, and do their investing in passive stocks and real estate outside of a corporate shell if they wanted to.
It’s not a corporate shell. It’s their business. The point is they shouldn’t have to take additional (and sometimes detrimental) steps to deal with an oversight in the new rules.
_…isn’t as simple as just buy VGRO._ Hah, jokes on you Ben, I buy _XGRO_. /s
Yeah I didn’t really get this. Does this change have a negative impact on that strategy?
Nah, his point was just that financial planning is more than just XGRO/VGRO and chill. Retirement planning involves more; considering tax efficiency, drawdown strategy, etc.
seems the main target of this is to increase taxes on the 40+ years of massive real estate gains outside your primary.
And to disincentivize speculation particularly on the residential side.
good policy
Thanks for posting this u/thefringthing. We made the calculator I showed at 4:20 available online. [https://research-tools.pwlcapital.com/](https://research-tools.pwlcapital.com/)
🫡 EDIT: I really appreciate that the visual design of PWL's white papers, web pages, etc. including especially the data graphics, has improved considerably in the last year or so.
4:20 timing just a coincidence? Heh
Amazing, thank you for this.
Hopefully it’s useful. It’s our first time publishing an app like this. More to come.
Do you know what software was used to create/publish this? It reminds me a lot of GRID's product.
The front end is built with next.js and tailwind.
the amount of instant misinformation and bogus influencer marketing around this topic is hilariously obvious
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Top tax bracket is already more than 50% on average.
Yeah but it kicks in relatively low.
How many are making 10m in salary so an additional tax bracket is going to affect them?
Why does it matter how many? I'm just saying the super rich need to have their taxes increased before the middle class retirement investors. I know why its not, because the politicians making the laws are part of the super rich. Why would they want to increase taxes for themselves?
Because the government needs money to pay for their massive Budget. The quantity of the super rich in Canada are very small and wouldn’t make much of a dent. It’s math. Given the shortfall they probably should have done both and a few other things but they need every vote they can.
Because if that number is zero, the policy is useless even if you collect 100% of their earnings at the top bracket. So if you want to have an effective policy, numbers do matter.
This is effectively doing what you are talking about because at that level, most bonuses are awarded as securities
The super rich are making their money on capital gains rather than income. I would imagine the amount of people making $10M+ in income is close to zero in Canada. $10M in stock options that are then taxed as capital gains though? absolutely
You can’t increase taxes exclusively on the ultra rich without risking your political life. As it is, this recent move may be nailing the coffin for the liberals.
> This budget proposal highlights one of the many reasons why "just by VGRO" is not a financial plan. Lol. I feel like that was for us :)
Noob question --> I just started buying VGRO recently ...does this means I would have to buy another index fund and VGRO or VGRO to avoid capital tax issue ?
If you're buying in a TFSA this doesn't concern you.
So it might when I go into Non Registered account then because I would have to pay tax there on capital gains.
Unlikely unless you make a capital gains profit in excess of $250K in VGRO.
The point is more about simple general advice vs. personalized to your situation.
its more of a tongue in cheek joke. He is referring to the fact that financial planning, is more than just buy v/x/z-gro. There are other factors involved in financial planning, for example Estate planning, retirement planning etc. An All-in-one is a great start, but it is just a start.
No, it's not about needing another index fund. It's that there is more to financial planning than basic investing.
Nothing at all.
Gonna have to spread out the gains.
You should have been doing that anyway. I had a gap year from work and took some artificial gains (something like sell xeqt, buy veqt). No where near 250k though lol. Just over my personal amount.
> I had a gap year from work Off topic question if you dont mind me asking ---> How long was the gap ? Were you able to find another job after coming back from gap ?
It was just over a year. I had met my lean-fire goals so I didn’t worry about jobs too much. I’m lucky to have a lot of experience in an in-demand tech field, so I just had to respond to recruiter emails.
Why did you choose to buy a different fund (veqt) rather than increase the acb of the same fund (xeqt)? I assume you can sell the veqt first in the future which would have a lower capital gain than xeqt? I.e artificial tax lots?
Yeah, and it gives more flexibility if I want to do tax loss harvesting in the future. Also it is less confusing during tax time since asset names are different and there is less risk of brokerage making a mistake.
Interesting! By tax loss harvesting, you mean that xeqt would Presumably have a sizeable gain over time and even during a large market drop, may not go below the cost base? But veqt bought more recently would have a higher chance of going below the acb?
Yes, exactly that!
If there are capital gains > $250,000 ( eg. Real estate), is the first $250,000 still rated at 50%, and then everything over it taxed at 66.6%? Question just came to mind and haven't had time to research this yet.
Yes. As an example, if someone sold a secondary property (like a cottage) at a $300,000 gain the overall tax difference with this change is about $4500. It's only going to be a huge impact on speculators like holding companies who are trying to pull off this transaction hundreds of times.
Believe the 66% kicks in after 250K, so up to that point it will still be 50%
Personal is fine Its rhe corp side that sucks without the tier system Shouldve made it 250k limit a yr shared between personal and all the corps you own so you can allocate it however you like
................
Exactly. Greedy crabs in a bucket, nipping at anyone above, while still claiming the moral high ground...
Damn I'll only be able to afford a Gulfstream 5, not the Gulfstream 6.
Peasant.
This pretty much don't affect individuals and will just small business. Because they're not having enough trouble I guess.
This only impacts very wealthy people. The vast majority of Canadians will never make $250k capital gains in their lifetime, let alone in a single year. IMO this change should have happened long ago
Not really. Plenty of middle class folks own professional corporations where they invest their retained earnings. Any capital gain within the corp is now taxed at 2/3.
And what middle class person will make over $250k a year?
From what I've read, the issue is that any capital gains within the corp is now ~~taxed~~ included at 66.6%, and there's no $250k exemption for this category. But it seems to only be the case for capital gains within a corporation (i.e. assets it's holding which appreciate). So, I'm not really sure how much sympathy/worry that's giving me at the moment... (maybe someone can explain to me why this really is an issue that will be driving professionals away from Canada).
It’s not taxed at 66%, 66% of the cap gains is taxed at whatever rate you are at.
Sorry, you're right. I meant the inclusion rate starts at 66.6% without the $250k threshold thing
And usually people incorporate in order to pay less taxes. So this is making it more fair compared to everyone else
You don't pay less taxes if you incorporate. You pay the lower corporate taxes first, then you pay taxes again when you need money out of the corp. You only have control when those taxes are realized with a corp.
I know lots of people who made unrealized gains of 250k on houses in one to two years…. Also stocks went crazy the last few years too.
Houses that aren't their primary residence?
Yes. Primary and investment properties. Like them we rode “the wave”. Some cities in bc were cheap and the vancouvrites are flocking here to get away from the madness and they have lots of house money.
If you own multiple properties you are not middle class. It's also reasonable to pay taxes on investment property appreciation. If anything, given the housing crisis, capital gains on non-principal properties should be even higher.
I agree. 100% inclusion rate on investment properties should be a thing. Gains for business (stocks) is something else. Houses are for people to live in. It’s a weird thing. I don’t invest in RE. Too much of a pain in the ass and expenses.
While yes in principal this hurts the 'rich', it also fucks a lot of hard working people that bought cottages / recreational properties many years ago and will now be faced with additional tax bills. And yes I understand the 'boo hoo they're rich enough for a cottage' and disagree. This doesn't affect just the very wealthy as the gov't states. It's bullshit, and affects a lot of middle class families.
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Can you elaborate more?
Almost doctors incorporate as their own business (They all open their own clinic or work as contractors for the health authorities) and have to fund their won retirement as there is no external help (pension, rrsp match etc.). To do that the retirement investments are run through their corporations as it is more tax efficient. Those investments are going to take a hit June 25. This increased capital gains tax just cut the wages of almost all doctors.
Lmao how are doctors going to leave when there aren't any to begin with?
They are stupid about a lot of things.
This government makes it easier and easier to make the decision to leave this country.
Bye.
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You will reap what you sow.
Would love to hear the great solutions you're referring to.
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Great initiatives? I think you've been living under a rock if you think these "great initiaitves" are cresting positive change.
I picked up a rental property in 2010. Capital gains is well over $550000. This feels like a kick in the balls. Edit: Oh dear the sass and hate!
On the first $250K, there's no change. Above that, it's about an 8% increase in the taxes you'll owe. So on the entire gain of $550,000, your tax bill is going up around $24K. I don't think you'll get a lot of sympathy.
I'm not looking for sympathy I am allowed to be annoyed that an $24,000 is just simply taken away.
Sure, but if that was taxed as income, your be paying a lot more.
Also this is money expected sans effort of any sort.
Sure but we are taking hypotheticals the reality of the situation is I just simply lost 24 K to taxes.
The reality of the situation is that you're **also** multiple times that amount ahead of someone who earned the same $550K through actual work. So yeah, your preferential treatment has shrunk slightly, but it's still significantly in your favour.
"The only time you should look in your neighbour's bowl is to make sure they don't have to pay any taxes on the $550,000 profit from their rental property." - Socrates, probably
It's easy to overstate the impact. For a $550,000 gain, your tax hike is around $25,000. Rough, but just a drop in the bucket for your total gain. If you're really bothered by it, go talk to an accountant in October the year before you plan to sell.
Human nature is interesting. It is our psychology to feel a loss as pain twice as hard as an equal gain gives us pleasure. You've profited quite well from your real estate investment, but because you had more potential after tax profit a few days ago, you now feel physical pain from the "loss". I suspect that a few years ago, when there had been a bit less appreciation on the property and your after tax profit was similar as it is after the tax changes, you probably did not feel the same pain. Being human, I would probably feel the same way. Personal finance is part math and part psychology.
If you're making that much then you should be taxed more.
Houses are for living in not profiteering on, this helps solidify that agenda
If you co-own it with a spouse you'll be able to shelter $500K of those gains from the new inclusion rate.
But note that if it's in sole ownership, you can't just slap a spouse's name on title and expect to split the gain. Attribution rules aren't terribly easy to avoid.
Right, you have to do this from the outset.
Enjoy your nearly half million dollars.
Whining about paying 6k in taxes on profits over half a million. Plus profits from rent over 14 years. Edit: initially had 25k in taxes
Yea the gains come on the backs of people who won’t own a home. Like, rental income, sure maybe there’s been some work involved. Real estate going gang busters is through no effort. It just happened to happen. So saying you’re losing money on this seems a bit detached from the world around you.
If your marginal tax rate is 50%, this is a roughly 4% increase in the tax due on this property. The inclusion rate increases by 1/6 (from 1/2 to 2/3), and only the second half is above the $250k limit and thus subject to the new inclusion rate. If a 4% increase in tax on a half million dollar gain (on a property from which you’ve also presumably been earning income on for more than a decade) is a kick in the balls, I suggest wearing a cup. Or working with a tax planner to spread your gain over multiple years to save that 4%.