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Federal Budget 2024 – Impact to Investors

April 22, 2024
Man looking at financials for the year ahead

Federal Budget 2024 – Impact to Investors

Last week the Canadian government presented their 2024 Federal Budget, which contained several items that may be of interest to Canadians. 

From a financial standpoint, at first glance the main concern with this budget is that it lacks clear priorities and fails to address key issues facing Canada. Many professionals feel that the budget lacks focus and coherence, with a plethora of initiatives but no overall strategy. Among them, it appears that this government is prioritizing short-term political gains over long-term vision (possible with a looming election in mind…) and fails to provide a clear direction for the country’s future.

Below are a few highlights that may impact many Canadians (along with our initial reaction).

Capital gains inclusion rate to increase

Currently, the capital gains inclusion is 50%, meaning half of any capital gain is taxable, and the other half is tax free. The budget proposes to increase the capital gains inclusion rate to two-thirds for any gains realized by corporations and trusts by June 25, 2024. 

The budget also proposes to increase the inclusion rate for personal capital gains from 50% to 66.7% for the portion of capital gains realized by individuals in a year that exceed $250,000.

Increase to the Home Buyers Plan 

The Home Buyer’s Plan has been a long-standing program to allow qualifying first-time home buyers to withdraw funds from their RRSPs tax free for the purchase of a home. The budget proposes to increase the amount that homebuyers can withdraw from their RRSP, from the previous limit of $35,000 to a proposed $60,000. 

Lifetime Capital Gains Exemption Increase for Small Businesses

The Lifetime Capital Gains Exemption (LCGE) allows individuals to be exempt from taxes on capital gains realized on the disposition of qualified small business corporation shares. The 2024 federal budget proposes to increase the LCGE by 25% to $1.25 million and this amount will continue to be indexed in 2026 and future years.

Canadian Entrepreneurs’ Incentive

The 2024 federal budget proposes to introduce the Canadian Entrepreneurs’ Incentive (CEI) to reduce the capital gains inclusion rate by one-half on the disposition of qualifying shares by an eligible individual starting January 1, 2025. 

The lifetime limit for this incentive would be phased in by increments of $200,000 per year beginning in 2025 and eventually reaching the maximum limit of $2 million If the individual is now subject to the 66.7% capital gains inclusion rate, this incentive would reduce the inclusion rate to one-third on disposition of qualifying shares. 

We Can Help

As your financial advisor, we can help you assess the impact of these proposals on your personal finances or business affairs and show you ways to take advantage of these benefits or ease the impact of the changes to your plans. 

More information on the budget can be found here

It is our strong belief that to be successful in reaching your goals it is necessary to have a plan in place and to follow a process. That is, to make your life and financial decisions not by accident but by design.

Remember, successful people ACT towards the future they want!

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