Capital gains tax can have a substantial impact on the administration of estates. Capital gains tax is levied on the profit earned from selling or disposing of an asset. When estate assets appreciate in value, they can become subject to this tax. Capital gains tax is also applied when you are deemed to have disposed of your assets on death.

The current capital gains tax only requires that fifty percent of the capital gain is considered to be taxable income. On April 16, 2024, it was announced that the federal 2024 budget proposes to amend the Income Tax Act. In doing so, now two thirds of capital gains will be taxable, this will include all capital gains realized on or after June 25, 2024. This applies to capital gains exceeding $250,000 realized by an individual in one year and any capital gains realized by a trust or corporation in a year. The principal residence exemption is still available.

These changes are important for those managing a loved one’s estate to be aware of, this can lead to heightened tax burdens when disposing of or transferring assets.

Please follow the link below for more information regarding the 2024 Federal Budget.

https://budget.canada.ca/2024/report-rapport/toc-tdm-en.html