Canadian Federal Politics Thread v5

[bizaro86]

Originally Posted by Winsor_Pilates

What if someone sells an investment property they've owned a long time and has gained more than $250k?
Does that count or is this strictly if the gain was in 1 year?

Definitely will count. I actually think that's probably the main target of this.

I also think you'll start to see avoidance actions, ie, buy a 50% Tenant-in-common interest in someone's lakefront cottage on Dec 31, and the other 50% interest on Jan 1st.

It will also make sense for the elderly with lots of unrealized capital gains to spread them out, instead of paying the higher rate on lots of them when they die.

[Winsor_Pilates]

Originally Posted by Cowboy89

Agreed. It appears that the move was specifically targeting estates and non-primary resident real estate gains. Using the 'only impact less than 0.13% of Canadians' line to make it seem like it's only a super rich person thing.

I'm still confused.
Example:
Say I've own a rental condo in Vancouver for 10 years and the value has gone up $300,000 in that time.
I sell it now, am I paying 66%?

[Cowboy89]

Effective date of the new capital gains tax rates is June 25, 2024. What this will do is will incent those people/companies/trusts to crystalize their gains by selling ahead of that deadline. The impact of this will create an immediate but unsustainable boost in tax revenue. This fiscal year will artificially look like the deficit is shrinking and just in time to talk about it ahead of the election next fall. It will be smoke and mirrors though. Very on brand for this gov't

[bizaro86]

Originally Posted by Winsor_Pilates

I'm still confused.
Example:
Say I've own a rental condo in Vancouver for 10 years and the value has gone up $300,000 in that time.
I sell it now, am I paying 66%?

No.

50% will be included in your income of the first 250k
66% will be included in your income of the last 50k.

[photon]

I kept the condo that my wife and I got when we first got married.

66%??!

I guess I'm not selling it after all.

EDIT: Ok I guess it's not as bad as 66% for the whole thing, still... maybe just keep it in case my kid wants to live there some day.

[Azure]

And then when the CPC comes in they should fire 50,000 public sector workers and cut $100 billion in spending.

[Azure]

Will that discourage corporate investment in real estate, especially residential, knowing that there would be a huge tax bill due upon selling?

[bizaro86]

Originally Posted by Azure

Will that discourage corporate investment in real estate, especially residential, knowing that there would be a huge tax bill due upon selling?

I think it probably makes investing in stocks slightly more attractive than real estate, since it's easier to spread out the gains by selling a portion.

[chemgear]

Originally Posted by photon

I kept the condo that my wife and I got when we first got married.

66%??!

I guess I'm not selling it after all.

EDIT: Ok I guess it's not as bad as 66% for the whole thing, still... maybe just keep it in case my kid wants to live there some day.

We found the rich guy. Get him!

[Cowboy89]

n/m

[chemgear]

Originally Posted by bizaro86

No.

50% will be included in your income of the first 250k
66% will be included in your income of the last 50k.

I like how their example is of a "High Income Individual" and include their imaginary salary that doesn't matter in the example. But makes for a good reason to say #### 'em.

https://www.canada.ca/en/department-...eneration.html

Example of a High Income Individual

A high income individual living in Ontario with a $400,000 salary also has a $300,000 gain from the sale of a second property. Under the current rules, they pay income tax on 50 per cent—$150,000—of that capital gain.

If they have the same gain in 2025, they will now pay tax on $158,333 of the gain (50 per cent x $250,000 = $125,000) plus (2/3 x $50,000 = $33,333) = $158,333).

Because of their high income putting them in the highest marginal tax rate, the change to capital gains taxation will cost them $4,461 more in combined federal-provincial income tax.

[Cowboy89]

n/m

[chedder]

Originally Posted by Azure

https://www.canada.ca/en/department-...usinesses.html

About bloody time.

Two positive things in the budget already! Who we gonna vote for folks!!

Can you dumb this down for us? How is a tax credit going back going to work?

[opendoor]

Originally Posted by Cowboy89

Example:

Let's assume your marginal income tax rate is 25%.

Sell your rental property before June 25, 2024.

$300,000 gain * 50% * 25% = $37,500


vs.

Sell your property after June 25, 2024:

Tax Bill = $39,583.33

-$300,000 gain - $250,000 annual limit = ($50,000*66.667%*25%)+($250,000*50%*25%) = $39,583.33

The bolded isn't possible with a $300K gain (assuming it's a single taxpayer claiming it). Even with zero other income, the marginal rate is going to be 40%+.

[opendoor]

Originally Posted by Winsor_Pilates

I'm still confused.
Example:
Say I've own a rental condo in Vancouver for 10 years and the value has gone up $300,000 in that time.
I sell it now, am I paying 66%?

It's exactly the same as normal capital gains, except the inclusion rate on the $250K+ portion is now 66% instead of 50%. So your $300K would break down as:

$0-250K portion – 50% ($125K) included as income

$250-300K portion – 66% ($33K) included as income

So on a $300K gain, $158K would be included in your income and taxed as opposed to now when only $150K would be included. So at a 50% marginal rate, that's $4K in additional tax compared to before.

[Cowboy89]

Originally Posted by opendoor

The bolded isn't possible with a $300K gain (assuming it's a single taxpayer claiming it). Even with zero other income, the marginal rate is going to be 40%+.

That's correct. It will be a much more complicated calculation than I illustrated.

[GGG]

Originally Posted by photon

I kept the condo that my wife and I got when we first got married.

66%??!

I guess I'm not selling it after all.

EDIT: Ok I guess it's not as bad as 66% for the whole thing, still... maybe just keep it in case my kid wants to live there some day.

It’s also only the inclusion rate. So if you had a 200k Condo that’s now worth 600k you’d pay tax on 250k*.50 + 150k*.66 so 225k at your marginal rate, say 33% federally. So 74.25k in federal taxes. Under the old system you’d pay tax on 200k of gains or 66k of taxes. So about 8k more under the new system on 400k profit at the top bracket.

[Leondros]

At the end of the day its really going to impact deemed dispositions upon death the most that you can't exactly tax plan for death. I mean you can - gift away early, but that's about it.

Massive gains on real estate could also get impacted as well. Think Vancouver and Toronto long term rental holds that have appreciated by millions over the past 2 decades. Flippers still may skirt under the $250K on a year-by-year basis depending on how long they are holding for.

[Azure]

Originally Posted by chedder

Can you dumb this down for us? How is a tax credit going back going to work?

Small businesses have been paying the carbon tax for years without a rebate, and the government has just been sitting on that money.

For businesses with less than 500 employees in provinces that are working with the feds on the carbon tax program, they should see a rebate per employee.

No idea how much it will be, but $2.5 billion divided by whatever the number.

The government has been unfair about this, and it turns out the entire thing was an election ploy as the money has literally been sitting there.

Scumbags, but nice to see the rebate.

[opendoor]

Also worth remembering that the inclusion rate (for the entire gain, not just above a given threshold) was 75% through the '90s and was lowered to 50% in 2000.

It probably will have some interesting side effects. I could see people crystallizing gains more regularly to stay under the $250K threshold. I suppose that would temporarily increase tax revenue at the cost of revenue in the future.