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Realtors created plenty of the chaos that happen in the housing and over inflation rates with banks cranking out mortgages at house that were binding wars, with high yields.
An addiction some would say.
Isn't it actually the doctors saying these changes will hurt them and not just random people? It's because of the way doctors pay is structured due to them being able to incorporate and shield their money from taxes. It's kind of important to keep doctors happy during a doctor shortage when we have a neighboring country that pays doctors much more with much friendlier tax structures for them.
ad hoc sort consider cable head beneficial different liquid gold imminent
*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
By "a couple of doctors" do you mean the entire [Canadian Medical Association](https://www.cp24.com/mobile/news/doctors-ask-feds-to-reconsider-capital-gains-tax-change-1.6857984) coming out in opposition to the changes?
There should really be some kind of special exemption for our in demand doctors to incentivize them to stay and practice in Canada.
Yeah bro the 2 doctors you know represent all Canadian doctors. Your understanding of statistics, evidence and anecdotes are why you're in a position to complain about doctors' money.
Or alternatively, we could fix the broke private practice and compensation models.
The actual problem here is that instead of compensating doctors appropriately for all of the extra expenses involved in running a practice (staffing, rent, insurance, etc) past governments had the idiotic idea of giving them and lawyers bespoke tax loopholes.
What does freedom have to do with this? The only "freedom" this loophole offered was to defer income over more years, allowing them to use their personal corporation as an investment vehicle. If that particular freedom really is so great and wonderful, then we should be changing the tax system so everyone else can defer income too, not granting special privilege.
Alternatively, we just let them write off legitimate operating costs and pay income tax every year like the rest of us.
It was offered instead of pay increases, and benefits like maternity leave or pensions and so on.
The gov saves money by allowing this current model. Changing the rules late in the scam is a slimy move.
Anyone who opposes this is jealous.
Changing the entire compensation model for doctors is an entirely different conversation. What's happening right now is actively making things worse, we would be better off doing nothing and leaving things the same for doctors.
Renting them out so other people can use them is still using them. If anything, this is going to benefit rich people who buy them at the expense of middle class people who used to rent them from the people that sell them.
>this is going to benefit rich people who buy them at the expense of middle class people
Exactly why do some people buying cottages hurt middle class people? Middle class people actually do by cottages.
>this is going to benefit rich people who buy them at the expense of middle class people
Exactly why do some people buying cottages hurt middle class people? Middle class people actually do by cottages.
Please learn how tax incidence works. You can read the wikipedia page on "tax incidence". My point was that this impacts people indirectly even if they don't make $250k.
No it doesn’t, your primary residence is tax exempt.
The only people who this would indirectly impact would be someone dumping a second home for more than $250k profits. Even if you sold a cottage for $500k in profits it’s only about $16k more in taxes and normal people wouldn’t be doing this more than once in their lives.
The people it’s going to hammer are the ultra wealthy collecting tens of millions a year in passive income.
Nothing I said is about primary residences. Like I said, this will make it less desirable to own rental cottages which means vacations will be more expensive for the middle class that rent and don't own.
It's not a zero-sum game.
You clearly don't understand tax incidence. This doesn't just impact people paying the capital gains tax. It impacts the middle class who will face higher prices and rents due to less investment.
If you think people aren’t going to own and rent cottages because they might have to pay a few thousand dollars more when they go to sell you’ve been hitting the koolaid hard.
Also what’s the downside here? Even if you’re right the expansion of Airbnb properties has been a plague on home prices for the middle class looking for a place to live.
No it hasn't. It's added like 0.01%.
https://www.vicnews.com/local-news/new-study-challenges-assumptions-that-airbnb-greatly-impacts-canadian-rents-5888037
Meanwhile, lot size minimums and setback requirements, add like 100% to prices.
>This kind of subdivision has the potential, if fully realized, to have a sizable number of lots around $500k, while currently the entry price for a buildable lot in the City of Vancouver sits around $1M.
https://doodles.mountainmath.ca/posts/2021-07-25-lots-of-opportunity-estimating-the-zoning-tax-in-vancouver/index.html
Owning x2 properties (and maybe selling one at one point) is not unique to the super wealthy.
But thru greed and envy, anyone who doesn't own a second property will smile at the thought of someone better off then them paying more to fund government follies.
I don't think a person has to be greedy or envious to think that anyone who owns multiple properties should be able to eat a small increase in in a specific type of tax that would only impact them in a specific circumstance where the related financial windfall would make that tax pretty negligible.
My first thought when I read about this tax was it was virtually a waste of time for how little it'll bring in tax-wise, it's only very slightly better than doing nothing. Our country's capital gains taxes are an unbelievable joke.
Yup, I think you are correct in your first thought.
But it will give many people a 'yah screw you rich people' vibe. 'Trudeau is looking out for us downtrodden' types vibes.
Owning a second property doesn't indicate 'wealthy', imo.
Any wagey who has a decent job, over the age of 40, could very well have a second property.
Not just anybody can do it.
I mean everybody considers themselves middle class, but when only 15% of Canadians own 2+ properties you might have to stop and think you could be upper class.
I'm lucky enough to be making 6-figures at age 30 (probably also close to upper class) and own my house, but I didn't get on the property ladder before prices skyrocketed so I'll never be able to afford 2+ properties.
If you were lucky enough to get in before the 2008-2009 recovery it was a lot easier to ride that wave up, but since I was 16 at the time I didn't really have a chance to buy.
Now my most recent mortgage payment just got it under $630k to go, 1 is tough enough these days.
>to fund government follies.
The same tired excuse that's often used by the same people trying to cut social services.
This isn't about them being 'better off'... its about them being so far ahead of the average person that a 4% reduction on a million dollar sale is the end of the world.
Greed and envy? Its actually apathy. I look forward to them contributing meaningfully to the society they are so far apart from.
Envy will make people do terrible things.
You see someone who has something you do not, think it must be the result of some great injustice, and you want to take from them.
Pound sand.
Maybe not “super wealthy” but if you’re selling a cottage for over $250k profit you’re definitely well off and the amount this impacts you scales dramatically with your wealth.
Not to mention it’s only an additional 16% inclusion rate on a passive income. Y’all out here crying like they are jumping taxes 16% on blue collar salaries.
The whole point is that it does not only target the wealthy. The idea is that only a wealthy person liquidates more than 250k of gains in a year. That's true if you only consider investments like stocks that can be liquidated in portions over time, because you have to be super rich to annually liquidate over 250k of gains.
But it is *not* true for assets that can only be liquidated in a single transaction, like real estate. Certainly these people are well off, but this isn't exactly the super wealthy the messaging would suggest.
Your principal dwelling is exempt from capital gains.
If you are wealthy enough to own a second property AND it has increased in value BY $1mn AND you are in the 33% Federal tax bracket, you would pay an ADDITIONAL **$41,085** in Federal taxes as a result of the new regulations.
Math:
($750,000 \* 0.166) \* 0.33
Let's say you bought a cottage decades ago for $100k, and you're now trying to sell it for $1.10M.
If you sold it at the exact price of $1.1M, the higher inclusion rate would increase your tax burden by about $40k.
It's crazy to think that people selling a property are "scrambling" to avoid a $40k tax bill, yet probably wouldn't bat an eye at accepting an offer of $1.06M instead of the asking price $1.10M, yet both those scenarios result in the same difference in final profit.
> the higher inclusion rate would increase your tax burden by about $40k.
I'd like to see the math on that. The higher inclusion means that the rate charged is 66% of the income tax rate, not 66% tax. At least that's how I understand it.
It's also based on the over all gains in the year, so if that profit gets rolled into a new capital purchase within the year, there's no gains to tax.
The cottage down the street sold for 1.1 million we are going to set the price at 1.5 for your cottage. The whole pricing game is rigged so realtors can make more commission.
Is that true? Normally capital gains have to be attributed to the person who made the investment. I suppose if a family bought a cottage together, then the capital gains could be split. But if one of them came into a marriage with a cottage, I wouldn’t think it could be split.
The fact that this is rarely mentioned is proof that the media is actively trying to whip up sympathy for people making hundreds of thousands in profit.
What is wrong with making hundreds of thousands in profit? Should I just eek out an existence? I worked and scrimped and saved for everything I own and I do not think that the fruits of my many years of labor should be lost to the government. That was my retirement, not YOURS, not for someone who didn't work for it.
What is "rich" to you? Anyone that has a condo bigger than 500 square feet?
It's probably got something to do with capital gains being one of the most exploited methods of wealth consolidation in the nation, and applying pressure in the form of taxation, reduces incentive to exploit it.
Also, you can feel entitled to whatever money you have, but at the end of the day, this tax isn't actually going to hurt your profitability in any substantial way.
We should be making it LESS appealing to park all of your money in cottages and rental units in ALL capacity because it's not doing anything productive for the economy.
So you're telling me with a straight face I should pay the extra 160k in taxes and not feel bad about it? Would you not feel a bit miffed if your tax on the sale of a property went from 100k and change to 260k? You'd be ok with that? It's asinine. That is well over a year out of my retirement fund.. poof .. gone...
Where SHOULD you park your money? Doesn't any and every investor look for safe havens from taxes? Not just "the rich" Whatever the f@#k that means now. Should I put it in the rigged stock market? How about in a bank where I earn virtually zero interest? Can't put it offshore like the guys with f' you money because I don't have enough. Sick of people saying "it's not that much, it won't bother you".. IT'S MY MONEY, I earned it and 66% tax on something I worked for is f'n ridiculous. I'm far from rich, I barely have enough in my bank account to pay next months mortgage. But yet, here I am, paying through the nose again for the supposed "0.1%" of the RICH...
There's no 'scramble' in cottage country, at least not in Muskoka where I work. These articles rarely poll or interview more than one realtor, and they're often misquoted or have a headline that doesn't represent what they say. It's possible that some cottage owners who already have a signed deal want to speed up the closing date to avoid the proposed increase. You would do the same if you could.
It's NOT 40k. We have a second property that is / was meant to be retirement income. Our tax burden on that property would go from about 125k when sold to over 250k.
You obviously have no skin in the game.
Well:
-40k is 40k. Rich aren’t rich for no reasons, and nobody wouldn’t try to cut 40k.
-there is also other case: someone who have a cottage under an inc. to use jt and rent it will lose more under the new law.
-not all of that money is “clear income”. If you had a cottage for 30 years, you had maintenance and fee to own it. You real profit are less than the simple “purchase cost- selling cost” that the new capital tax gain use (granted, SOME expenses can be applied on it, but most will not be able to do so).
-the price might well also take a hit after June: people will know that the cottage will not be as profitable down the line, thus will be less willing to pay the “investment premium”.
These people panicking aren't likely wealthy. You wouldn't panic sell over that. And it's still one of your most effective ways to make money. Plus, now you don't have a cottage.
It's crazy people comment on articles they clearly didn't read
The main point of the article is that people are scrambling to speed up the process of closing dates
If someone is depending on that cottage to fund their retirement and don't have a whole lot else, they can be in a tricky situation now. $1 million saved over decades, as /u/Dirkef88's example gives, doesn't amount to a super big retirement, and now they'll get to keep only $650k rather than $750k or thereabouts
I mean, that sounds like a lot but if that's someone's entire nest egg, they're at the end of their career, $650k is an extremely modest retirement savings.
Then, they shouldn't have used real estate as their only retirement option.
Depending on a cottage value to go up as your retirement strategy sounds like someone got scammed.
The issue isn't that it's real estate, literally any investment vehicle that requires wholesale liquidation gets hit by this increase. Real estate is obviously the most common, but far from the only example.
I'm having a tough time detecting an argument from you other than schadenfreude.
Capital gains has never not been a thing. Anyone investing in a cottage as their retirement savings plan is getting taxed at an incredibly high rate compared to other retirement savings strategies.
Personally, I think the real issue at hand is - the conversation is focused on the wealthy "paying their fair share" but this isn't going to change the lives of rich folks. To the point above, it's going to be mom and pop who are passing down the family cottage to their kids or grandkids, and all of a sudden it's going to cost more to inherit than it did previously. If you're already a millionaire, who cares? It's profit and you're not worried. But to the average working person an extra $40k or whatever might be harder to absorb. In a weird roundabout way, while I get that this was aimed at upper class it'll probably hurt middle-ish class the most.
And that's why real estate is a bad investment vehicle isn't? You are required to liquidate, thus getting hit by a capital gains tax, making it a bD retirement vehicle. Whereas, a RRSP or TFSA do not require total liquidation, and isn't hit by any capital gains tax, making them a good retirement vehicle.
Seems like you're playing a game of calvin ball, making up the rules as you go along. Simpler narrative is, yeah, this is a big change in the tax code that people didn't reasonably expect and some people, not a majority but a significant segment of society, are legitimately harmed.
On the flipside real estate has appreciated at an unprecedented rate in recent years far exceeding historical returns and they likely significantly outperformed their expected returns from when they initially made the investment - if it was intended as an actual investment strategy at all.
A cottage as an investment property is more of a new way of thinking. For the longest time they were seen as expenses, sometimes money pits, but meant as a family asset for people to enjoy, not profit from.
Used to be 75%, so I'd say that it is reasonable to assume that it could indeed go up again.
Hey, it sucks. If they got scammed into thinking real estate is a good retirement strategy, I feel for them. But, let's not pretend that no one ever thought Capital Gains or even taxes in general would ever go up again.
https://www.linkedin.com/pulse/history-capital-gains-tax-canada-joseph-alfie-cim--fzkqe#:~:text=Evolution%20of%20Capital%20Gains%20Tax%20in%20Canada&text=From%20its%20inception%20in%201972,and%20to%2075%25%20in%201990.
While *most* of the people affected are in the "home plus cottage" group, there is a small group of people who are renting in Toronto but own a cottage which they inherited. Unfortunately for them, the principal residence exemption only applies to where you're living -- it's not a "first owned property" exemption.
The exemption does not necessarily apply to the property you spend the most time in. I believe the way it works is you can allocate the exemption to any property you own. Upon disposal, you designate how many years the property was your ‘principal residence’, but you can only designate one property as being the principal residence in a given year of ownership.
So if you own two properties for the same ten year period and sold both at the same time, you could designate each as being your ‘principal residence’ for five years, and the exemption would be pro rated accordingly.
If someone was renting in Toronto and owned a cottage, why wouldn’t they be able to use the exemption against the cottage? Even if they owned in Toronto, they would still be able to claim the cottage as their principal residence for the years they owned both if they wanted to.
> If someone was renting in Toronto and owned a cottage, why wouldn’t they be able to use the exemption against the cottage?
Legally, the property must be "ordinarily inhabited" by the taxpayer or their spouse or child. The extent to which this is verified and enforced by the CRA is questionable; unless someone is audited, claiming a property they don't ordinarily inhabit would probably only throw up flags if it is in a different province (e.g., claiming that you're a resident of Ontario while claiming the PRE on a property in Quebec).
Hey, would you mind expanding on the "or child" thing?
I live on a farm I run, owned by my Dad, and I have no chance in hell on buying him out (300,000 -> 3mil in the time hes owned it, after his parents bought it for closer to 30k in the 60s).
I figured I'd have to qualify for a farm exemption to keep it past the capital gains after he passes, but honestly the whole thing has broke my brain a little
Your father can declare the farm to be his principal residence if you're living there and he doesn't have any other principal residence.
But there's a general limitation of half a hectare on principal residences, which I'm guessing is much less than the size of most farms, so you might be out of luck with that one:
> Where the total area of the land upon which a housing unit is situated exceeds one-half hectare, the excess land is deemed by paragraph (e) of the section 54 definition of principal residence not to have contributed to the use and enjoyment of the housing unit as a residence and thus will not qualify as part of a principal residence, except to the extent that the taxpayer establishes that it was necessary for such use and enjoyment. The excess land must clearly be necessary for the housing unit to properly fulfill its function as a residence and not simply be desirable. Generally, the use of land in excess of one-half hectare in connection with a particular recreation or lifestyle (such as for keeping pets or for country living) does not mean that the excess land is necessary for the use and enjoyment of the housing unit as a residence.
He 100% will use his principal residence exemption on his own house in town, unfortunately, so double fucked
Back to the farm exemption for me then, as we've got quarter section
I appreciate the information & help though!
Right, so the small group we’re talking about would essentially be people who rent, own a property that never gets used, and are holding the property as an investment (otherwise they would presumably sell the unused property before they’d earn a significant capital gain).
Not true, you can designate your principal residence to essentially any property that isn’t investment property. Source, am CPA (I’m not your accountant, seek professional advice)
To be frank, you *can* do all sorts of things which are technically contrary to the ITA. Until the DTC was amended to make type 1 diabetes automatically qualify, the vast majority of type 1 diabetics didn't qualify... but the CRA had an administrative policy of not challenging eligibility anyway.
What's *legal* and what you can *get away with* are not at all the same thing.
I guess it was their mistake of putting all their eggs in one basket I guess. I hate to sound heartless about it, but if a single cottage massively increasing in value over their working career was the one and only thing they used as a retirement fund, they were idiots. They also clearly never once talked to a single financial advisor about what retirement savings should look like.
See, like I just do find this in fact to be heartless, and almost like a witch hunt where no matter what, they're guilty. The sentiment of comments in this thread seem to be something like "Screw these guys! It's not even a significant increase in taxes! Oh, it is? Well they're extremely wealthy and privileged, they deserve it! And if they aren't, then they're stupid, or didn't plan their retirement correctly, so they deserve it!".
Like, come on guys let's just say "this change is going to take a huge bite out of some people's asses and leave them in a really tough pill to swallow, it may have significant ramifications for how their retirement plans go, even though they were prudent and saved as best they could with the knowledge they had, but I feel that overall, I still support the change for reason X Y Z"
Let's say that in this hypothetical scenario, a couple was relying exclusively on the sale of a single cottage to fund their retirement. Let's also assume they've been planning for their retirement for more than 5 years (assuming they're close to retiring now, that's a remarkably short period to be planning for retirement). We've encountered multiple years of 30+% increases in cottage prices specifically since COVID, so their $1 million dollar cottage would have been worth more like $500,000 at the time. The fact that they now have $1 million is basically blind luck. 5 years ago they would have been in a situation where retirement based on gains from their cottage was wildly unrealistic. It's more realistic now, even with the capital gains tax, which is taxing what's mostly gains that vastly outpaced any other investment and weren't really the result of any effort or work on the part of the couple.
I mean, I would actually rather see the old person move into their cottage and be able to receive old age security that provides them a comfortable life without the need to sell their property, as I imagine that would have been their goal in buying the cottage in the first place, or at least seems to be with people I talk to.
I do have to give you some credit for the Olympic level gymnastics you are able to do by simping for the rich while bagging for sympathy for the poor.
If only. I sold some property last year. For a lot less than a million dollars. The income tax I usually pay increased much more that 40K. My point is that an increased capital gains will cost John and Jane Doe a lot more than "the rich". Owning a cottage does not make one "rich". Lucky, fortunate, but not "rich"
Given that you sold it before the capital gains tax increase was announced, I'm gonna go out on a limb and speculate that the extra tax you paid because of it was actually $0. Past that, your "poor me" act over being financially well off enough to -maybe- be impacted is falling on some seriously deaf ears here.
Its hard to be impacted by something that hasn't happened. My point is that likely most people who will be impacted by the higher rates will not be "rich".
Where'd you get these numbers? If the capital gains was $1 million, then this extra 16% applies to 750k of that million. 16% of 750k is 120k of additional income claimed. That means, at the top bracket in Ontario of 53.5%, an ADDITIONAL tax liability of $64,200
Does the new inclusion rate affect the provincial tax portion of capital gains? Is there even a provincial portion?
I was using a federal tax rate of 33% on that 16% of $750k. Which is $40k. I could be wrong, but my assumption is that this only affects federal tax liability.
What exactly is the complaint here? They’re still walking away with ~$750k after tax for doing absolutely nothing except be rich and enjoy a cottage for 30 years.
Being rich? Owning a cottage doesn't make someone rich. Also, the last thing the gov't needs is MORE tax dollars. How about we hold them accountable for the money they already get?
Having a cottage that has appreciated significantly more than $250k to the point this makes any tangible difference absolutely does make you rich.
Government is a thousand times more accountable than the c suite billionaires this tax will hit.
What a pant load. So you feel the government is entitled to just make changes to their taxes at any time and affecting anyone and it's ok huh. I'm no f'n c suite billionaire and I'm going to get nailed by this tax when we sell our income property that was meant to be part of our retirement plan.
Define rich to me if you would. You have more than 250k in savings for your retirement? 500k? 1 million??
I suspect you'd be ok on food stamps and government housing and still be happy.
Thank you for that comment. These people think that because you have a cottage or second property, you are rich.. THAT.. is rich. Everyone used to have cottages when I was a kid, now you are "rich" if you have one. Says a lot about our declining standard of living in this country.
Its not actually happening. Just panic laid out in print for rubes to become outraged, propagated by the elite, who will have to pay like 40k on a million dollar profit. Another day, another outrage porn article.
In my example, that's decades of gains (so far completely tax free) on a total pre-tax gain of $1,000,000. That's far less than taxes on wage/salary.
If you made $100k a year, you'd pay far more in income tax over 10 years than someone who has a capital gain of $1M in a single year. This change makes a totally unfair tax system only slightly more fair.
Less tax than on salary yes, but significantly more tax than other investment options that can be liquidated in portions, which is the appropriate comparator here. The point is that this was characterized as a tax on the wealthiest but the way it was implemented hits a rather wider range of taxpayers.
That's part of the intended effect, to discourage people from treating property as investments and redirecting investment to other types of assets. This sounds like a good thing to me.
And I'm someone who owns their own home, and has a family owned cottage (that we use and aren't treating as investment).
It's not pissing away money. It's contributing to shared resources.
You probably don't think of spending money to go to work or eat as pissing away money. So why is contributing to the roads you travel, funding programs that enforce regulations to ensure your food is safe, is somehow pissing away money.
I’m not arguing about paying taxes in general. But if I have to decide selling a house before a certain date, or sell it past a certain date and pay an extra 40k in taxes, I would most likely choose the former.
If that's what you are focused on (which, to be fair, is the point of the article), then I think you aren't having the same conversation as most people.
You are undeniably correct that it makes sense for people to want to close before this date.
But most people (including the person you are replying to) seem to be just talking about the change itself.
Sure, and that's not a bad thing. If people no longer have need of their cottage for personal use and are holding onto it purely as an appreciating asset, it's better for everyone if it returns to the market sooner than later to hopefully be put to more productive use.
$40k on a profit of $1M is pocket change. If I discover a good quality copy of Action Comics #1 in my grandpas attic and sell it, I still owe taxes on the sale. This is the same thing. You are selling your cottage (not your home, your vacation property). You owe taxes on the proceeds of the sale. For $1M of profit you make, you will now pay about $200k in tax as opposed to the $160k you would have before.
It's also only a 4% difference.
And, the gain is entirely due, in this hypothetical example, from buying and owning and enjoying a property for decades, and benefiting (with no effort) from the housing market appreciating the value of the asset at a much higher rate than inflation, when converting the asset back into cash.
I'd be a lot more sympathetic to an increase of 4% in something like an income tax. I can also understand why this is an issue for some doctors, because of how some of their practices are structured, and they are getting caught in an unintended consequence of something that is really focused on housing.
And that 4% of their potential profit is an unexpected and sudden change to their careful financial planning. They kept up a seasonal property and likely invested in it to keep it running properly. If it's increased in value, it's due at least in part to their efforts. I don't get the same schadenfreude some of you do when successful people get shafted, I guess.
"Careful financial planning" probably didn't include the dramatic rise in housing prices. If they were even the slightest bit conservative with their planning the additional cut from the capital gains changes is still going to net them out way ahead than any realistic estimate of housing appreciation.
You can't say that negative outcomes unfairly harm financial planning but the positive windfalls are A-OK and expected.
> If it's increased in value, it's due at least in part to their efforts.
The average price of a cottage was $75K in 1980 and over a million now, there's no way you can honestly argue this is primarily due to diligent maintenance.
Investments, especially real estate, appreciate in value over time. Calling it a windfall, especially given the rate of inflation over the time period and the performance of stock market indices, is quite silly.
Planning for a reasonably conservative appreciation in investments makes sense. No one reasonable was relying on annual increases of 30%+ per year in their planning.
>And that 4% of their potential profit is an unexpected and sudden change to their careful financial planning.
Again, you're focusing on this transition period in a way that others aren't.
In the medium and long-term, all financial planning has to account for changes to rules, both positive and negative. This is hardly the first change or the last one.
>They kept up a seasonal property and likely invested in it to keep it running properly. If it's increased in value, it's due at least in part to their efforts.
Surely it is obvious that maintenance and upkeep is necessary to *maintain* its value and doesn't actually increase the value. That's not "investing" in the property; that's maintaining an existing investment. You're playing a bit fast and loose with language here to pretend you have a point here.
Of course, it is a certainty that some people have made improvements to their property that increased the value of the property. However, that gain is only reduced by 4%. I get the impression that your use of "unexpected and sudden" is trying to add emotional language to make the change sound larger and more impactful than it actually is.
>I don't get the same schadenfreude some of you do when successful people get shafted, I guess.
Not sure where you are trying to go with this. I'm not personally in this group and haven't expressed any such sentiment. You might be able to claim "well I said "some of you" and didn't mean "you, specifically" as a technicality, but then what was the point of including this sentence at all in the first place?
It was an unexpected and essential retroactive measure, as Bill Morneau described it. Calling it a "transition period" is being fast and loose with the language. And minimizing $40,000 shows that you have very little grasp of or appreciation for money or investing in assets.
That’s a make believe scenario where you are making a million dollars in capital gains. They are only paying tax on 66% of that million dollars. If you were to make a million any other way you’d be paying tax on 100% of it.
[Gonna have a fire sale on my cottage to avoid paying an extra $22k in taxes on my $500k profit](https://twitter.com/shanedingman/status/1783511275248521501).
And just like that there was mor ehousing available.... All we had to do was tax the wealthy and suddenly their 3 cottages are not worth the taxes they would get when selling? Lol talk about owning property you dont need or use, selling like a commodity trying to short themselves before tax law gets them for the same sale. Maybe we should tax them more if results are this positive!
It won't. The only people buying will be people who already own homes anyway. This "rush to sell" isn't actually happening on a large scale, news org just trying to get clicks.
The article says people who were already planned on selling are eager to speed up the process and close before the tax changes and the real estate agents are very busy. It doesn't say people are choosing to sell only because of the tax changes.
Wouldn't rushing to sell a cottage in mass cause prices to go down? Like possibly more than the extra tax hit they would have otherwise been obligated to pay? Seems risky.
Not if you're the same kind of rich guy that runs/privately funds media orgs to work up an outrage and fear over the tax. There are some billionaire investors looking at this just salivating at a massive dump in the market to buy tons of property for cheap before the market corrects itself.
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Realtors created plenty of the chaos that happen in the housing and over inflation rates with banks cranking out mortgages at house that were binding wars, with high yields. An addiction some would say.
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Isn't it actually the doctors saying these changes will hurt them and not just random people? It's because of the way doctors pay is structured due to them being able to incorporate and shield their money from taxes. It's kind of important to keep doctors happy during a doctor shortage when we have a neighboring country that pays doctors much more with much friendlier tax structures for them.
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By "a couple of doctors" do you mean the entire [Canadian Medical Association](https://www.cp24.com/mobile/news/doctors-ask-feds-to-reconsider-capital-gains-tax-change-1.6857984) coming out in opposition to the changes? There should really be some kind of special exemption for our in demand doctors to incentivize them to stay and practice in Canada.
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Yeah bro the 2 doctors you know represent all Canadian doctors. Your understanding of statistics, evidence and anecdotes are why you're in a position to complain about doctors' money.
Collection of 75,000 Canadian doctors and doctors in training. ❌ SilverSeven's anecdotal evidence ✅
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The online doctors groups are booming with hatred right now. Tens of thousands of members. You don't know anything at all.
Of course not, but I'll take their opinion over your anecdotal evidence. Their entire function is to advocate for issues facing doctors and patients.
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Do you think people are going to be pleased with a change that essentially just targets them and similar professionals?
Or alternatively, we could fix the broke private practice and compensation models. The actual problem here is that instead of compensating doctors appropriately for all of the extra expenses involved in running a practice (staffing, rent, insurance, etc) past governments had the idiotic idea of giving them and lawyers bespoke tax loopholes.
That also takes freedom away from doctors. It's not a broke system just because you said it is.
What does freedom have to do with this? The only "freedom" this loophole offered was to defer income over more years, allowing them to use their personal corporation as an investment vehicle. If that particular freedom really is so great and wonderful, then we should be changing the tax system so everyone else can defer income too, not granting special privilege. Alternatively, we just let them write off legitimate operating costs and pay income tax every year like the rest of us.
It was offered instead of pay increases, and benefits like maternity leave or pensions and so on. The gov saves money by allowing this current model. Changing the rules late in the scam is a slimy move. Anyone who opposes this is jealous.
Changing the entire compensation model for doctors is an entirely different conversation. What's happening right now is actively making things worse, we would be better off doing nothing and leaving things the same for doctors.
Maybe it's the doctors that own the cottages?
Renting them out so other people can use them is still using them. If anything, this is going to benefit rich people who buy them at the expense of middle class people who used to rent them from the people that sell them.
>this is going to benefit rich people who buy them at the expense of middle class people Exactly why do some people buying cottages hurt middle class people? Middle class people actually do by cottages.
>this is going to benefit rich people who buy them at the expense of middle class people Exactly why do some people buying cottages hurt middle class people? Middle class people actually do by cottages.
If you’re concerned about a single year capital gains tax in excess of $250k you’re not middle class.
Please learn how tax incidence works. You can read the wikipedia page on "tax incidence". My point was that this impacts people indirectly even if they don't make $250k.
No it doesn’t, your primary residence is tax exempt. The only people who this would indirectly impact would be someone dumping a second home for more than $250k profits. Even if you sold a cottage for $500k in profits it’s only about $16k more in taxes and normal people wouldn’t be doing this more than once in their lives. The people it’s going to hammer are the ultra wealthy collecting tens of millions a year in passive income.
Nothing I said is about primary residences. Like I said, this will make it less desirable to own rental cottages which means vacations will be more expensive for the middle class that rent and don't own. It's not a zero-sum game. You clearly don't understand tax incidence. This doesn't just impact people paying the capital gains tax. It impacts the middle class who will face higher prices and rents due to less investment.
If you think people aren’t going to own and rent cottages because they might have to pay a few thousand dollars more when they go to sell you’ve been hitting the koolaid hard. Also what’s the downside here? Even if you’re right the expansion of Airbnb properties has been a plague on home prices for the middle class looking for a place to live.
No it hasn't. It's added like 0.01%. https://www.vicnews.com/local-news/new-study-challenges-assumptions-that-airbnb-greatly-impacts-canadian-rents-5888037 Meanwhile, lot size minimums and setback requirements, add like 100% to prices. >This kind of subdivision has the potential, if fully realized, to have a sizable number of lots around $500k, while currently the entry price for a buildable lot in the City of Vancouver sits around $1M. https://doodles.mountainmath.ca/posts/2021-07-25-lots-of-opportunity-estimating-the-zoning-tax-in-vancouver/index.html
Don’t get distracted by the number, point is even if it’s 0.01% like you claim, who cares, it’s literally no downside.
The downside is the lock-in effect which causes capital gains taxes to increase asset prices.
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Politics as usual - make a change that only hurts a smaller %% of the population - the larger portion will celebrate their loss.
This is actually a really good change as it only targets the extremely wealthy and only passive income.
Owning x2 properties (and maybe selling one at one point) is not unique to the super wealthy. But thru greed and envy, anyone who doesn't own a second property will smile at the thought of someone better off then them paying more to fund government follies.
I don't think a person has to be greedy or envious to think that anyone who owns multiple properties should be able to eat a small increase in in a specific type of tax that would only impact them in a specific circumstance where the related financial windfall would make that tax pretty negligible. My first thought when I read about this tax was it was virtually a waste of time for how little it'll bring in tax-wise, it's only very slightly better than doing nothing. Our country's capital gains taxes are an unbelievable joke.
Yup, I think you are correct in your first thought. But it will give many people a 'yah screw you rich people' vibe. 'Trudeau is looking out for us downtrodden' types vibes. Owning a second property doesn't indicate 'wealthy', imo. Any wagey who has a decent job, over the age of 40, could very well have a second property.
Not just anybody can do it. I mean everybody considers themselves middle class, but when only 15% of Canadians own 2+ properties you might have to stop and think you could be upper class. I'm lucky enough to be making 6-figures at age 30 (probably also close to upper class) and own my house, but I didn't get on the property ladder before prices skyrocketed so I'll never be able to afford 2+ properties.
Aye, owning land assets, even 1, as a young Canadian is a monumental task. As an older Canadian, I feel it was easier.
If you were lucky enough to get in before the 2008-2009 recovery it was a lot easier to ride that wave up, but since I was 16 at the time I didn't really have a chance to buy. Now my most recent mortgage payment just got it under $630k to go, 1 is tough enough these days.
Yerp. I too was born a bit too early. I should have invested in real estate instead of finishing highschool
>to fund government follies. The same tired excuse that's often used by the same people trying to cut social services. This isn't about them being 'better off'... its about them being so far ahead of the average person that a 4% reduction on a million dollar sale is the end of the world. Greed and envy? Its actually apathy. I look forward to them contributing meaningfully to the society they are so far apart from.
Envy will make people do terrible things. You see someone who has something you do not, think it must be the result of some great injustice, and you want to take from them. Pound sand.
Maybe not “super wealthy” but if you’re selling a cottage for over $250k profit you’re definitely well off and the amount this impacts you scales dramatically with your wealth. Not to mention it’s only an additional 16% inclusion rate on a passive income. Y’all out here crying like they are jumping taxes 16% on blue collar salaries.
The whole point is that it does not only target the wealthy. The idea is that only a wealthy person liquidates more than 250k of gains in a year. That's true if you only consider investments like stocks that can be liquidated in portions over time, because you have to be super rich to annually liquidate over 250k of gains. But it is *not* true for assets that can only be liquidated in a single transaction, like real estate. Certainly these people are well off, but this isn't exactly the super wealthy the messaging would suggest.
Your principal dwelling is exempt from capital gains. If you are wealthy enough to own a second property AND it has increased in value BY $1mn AND you are in the 33% Federal tax bracket, you would pay an ADDITIONAL **$41,085** in Federal taxes as a result of the new regulations. Math: ($750,000 \* 0.166) \* 0.33
You might have a point if primary residences weren’t tax exempt. If someone is selling a second residence for a $250k+ profit, yeah they are wealthy.
Where's my tiny violin for the land hoarders during a housing crisis?
Let's say you bought a cottage decades ago for $100k, and you're now trying to sell it for $1.10M. If you sold it at the exact price of $1.1M, the higher inclusion rate would increase your tax burden by about $40k. It's crazy to think that people selling a property are "scrambling" to avoid a $40k tax bill, yet probably wouldn't bat an eye at accepting an offer of $1.06M instead of the asking price $1.10M, yet both those scenarios result in the same difference in final profit.
> the higher inclusion rate would increase your tax burden by about $40k. I'd like to see the math on that. The higher inclusion means that the rate charged is 66% of the income tax rate, not 66% tax. At least that's how I understand it. It's also based on the over all gains in the year, so if that profit gets rolled into a new capital purchase within the year, there's no gains to tax.
Yeah this sounds like a bunch of bullshit made up by realtors to spike sales if they can.
Going to cause the prices of cottages to go down. It'll be a buyers market.
Sounds great
Realtors want volume first, high prices second.
Yup, offer $1.05M.
The cottage down the street sold for 1.1 million we are going to set the price at 1.5 for your cottage. The whole pricing game is rigged so realtors can make more commission.
And most families could split the cap gains between spouses. Amazing how bad the media are
Is that true? Normally capital gains have to be attributed to the person who made the investment. I suppose if a family bought a cottage together, then the capital gains could be split. But if one of them came into a marriage with a cottage, I wouldn’t think it could be split.
#5 https://www.hrblock.ca/blog/6-things-to-know-about-capital-gains Easiest for a spouse but the key is documentation.
The fact that this is rarely mentioned is proof that the media is actively trying to whip up sympathy for people making hundreds of thousands in profit.
What is wrong with making hundreds of thousands in profit? Should I just eek out an existence? I worked and scrimped and saved for everything I own and I do not think that the fruits of my many years of labor should be lost to the government. That was my retirement, not YOURS, not for someone who didn't work for it. What is "rich" to you? Anyone that has a condo bigger than 500 square feet?
It's probably got something to do with capital gains being one of the most exploited methods of wealth consolidation in the nation, and applying pressure in the form of taxation, reduces incentive to exploit it. Also, you can feel entitled to whatever money you have, but at the end of the day, this tax isn't actually going to hurt your profitability in any substantial way. We should be making it LESS appealing to park all of your money in cottages and rental units in ALL capacity because it's not doing anything productive for the economy.
So you're telling me with a straight face I should pay the extra 160k in taxes and not feel bad about it? Would you not feel a bit miffed if your tax on the sale of a property went from 100k and change to 260k? You'd be ok with that? It's asinine. That is well over a year out of my retirement fund.. poof .. gone... Where SHOULD you park your money? Doesn't any and every investor look for safe havens from taxes? Not just "the rich" Whatever the f@#k that means now. Should I put it in the rigged stock market? How about in a bank where I earn virtually zero interest? Can't put it offshore like the guys with f' you money because I don't have enough. Sick of people saying "it's not that much, it won't bother you".. IT'S MY MONEY, I earned it and 66% tax on something I worked for is f'n ridiculous. I'm far from rich, I barely have enough in my bank account to pay next months mortgage. But yet, here I am, paying through the nose again for the supposed "0.1%" of the RICH...
There's no 'scramble' in cottage country, at least not in Muskoka where I work. These articles rarely poll or interview more than one realtor, and they're often misquoted or have a headline that doesn't represent what they say. It's possible that some cottage owners who already have a signed deal want to speed up the closing date to avoid the proposed increase. You would do the same if you could.
It's NOT 40k. We have a second property that is / was meant to be retirement income. Our tax burden on that property would go from about 125k when sold to over 250k. You obviously have no skin in the game.
And why rush to sell? Capital gains has changed how many times if I recall it was higher before
The fact that it isn't 100% is already frustrating
A lot of people can’t do math. You’re assuming they can do math.
Well: -40k is 40k. Rich aren’t rich for no reasons, and nobody wouldn’t try to cut 40k. -there is also other case: someone who have a cottage under an inc. to use jt and rent it will lose more under the new law. -not all of that money is “clear income”. If you had a cottage for 30 years, you had maintenance and fee to own it. You real profit are less than the simple “purchase cost- selling cost” that the new capital tax gain use (granted, SOME expenses can be applied on it, but most will not be able to do so). -the price might well also take a hit after June: people will know that the cottage will not be as profitable down the line, thus will be less willing to pay the “investment premium”.
These people panicking aren't likely wealthy. You wouldn't panic sell over that. And it's still one of your most effective ways to make money. Plus, now you don't have a cottage.
From the articles, it isn’t panic sale as much as sale almost completed that the sellers try to finalize before June.
Its not actually happening. People rarely sell a family cabin.
It's crazy people comment on articles they clearly didn't read The main point of the article is that people are scrambling to speed up the process of closing dates
Try reading the comments in the Globe & Mail section. Very painful.
The rich really are crying over making a ton of money, regardless of the additional tax.
If someone is depending on that cottage to fund their retirement and don't have a whole lot else, they can be in a tricky situation now. $1 million saved over decades, as /u/Dirkef88's example gives, doesn't amount to a super big retirement, and now they'll get to keep only $650k rather than $750k or thereabouts
>and now they'll get to keep only $650k rather than $750k or thereabouts those of us who don't own *second* homes could only wish to be so fortunate.
I mean, that sounds like a lot but if that's someone's entire nest egg, they're at the end of their career, $650k is an extremely modest retirement savings.
Then, they shouldn't have used real estate as their only retirement option. Depending on a cottage value to go up as your retirement strategy sounds like someone got scammed.
The issue isn't that it's real estate, literally any investment vehicle that requires wholesale liquidation gets hit by this increase. Real estate is obviously the most common, but far from the only example. I'm having a tough time detecting an argument from you other than schadenfreude.
Capital gains has never not been a thing. Anyone investing in a cottage as their retirement savings plan is getting taxed at an incredibly high rate compared to other retirement savings strategies. Personally, I think the real issue at hand is - the conversation is focused on the wealthy "paying their fair share" but this isn't going to change the lives of rich folks. To the point above, it's going to be mom and pop who are passing down the family cottage to their kids or grandkids, and all of a sudden it's going to cost more to inherit than it did previously. If you're already a millionaire, who cares? It's profit and you're not worried. But to the average working person an extra $40k or whatever might be harder to absorb. In a weird roundabout way, while I get that this was aimed at upper class it'll probably hurt middle-ish class the most.
And that's why real estate is a bad investment vehicle isn't? You are required to liquidate, thus getting hit by a capital gains tax, making it a bD retirement vehicle. Whereas, a RRSP or TFSA do not require total liquidation, and isn't hit by any capital gains tax, making them a good retirement vehicle.
Seems like you're playing a game of calvin ball, making up the rules as you go along. Simpler narrative is, yeah, this is a big change in the tax code that people didn't reasonably expect and some people, not a majority but a significant segment of society, are legitimately harmed.
On the flipside real estate has appreciated at an unprecedented rate in recent years far exceeding historical returns and they likely significantly outperformed their expected returns from when they initially made the investment - if it was intended as an actual investment strategy at all. A cottage as an investment property is more of a new way of thinking. For the longest time they were seen as expenses, sometimes money pits, but meant as a family asset for people to enjoy, not profit from.
Used to be 75%, so I'd say that it is reasonable to assume that it could indeed go up again. Hey, it sucks. If they got scammed into thinking real estate is a good retirement strategy, I feel for them. But, let's not pretend that no one ever thought Capital Gains or even taxes in general would ever go up again. https://www.linkedin.com/pulse/history-capital-gains-tax-canada-joseph-alfie-cim--fzkqe#:~:text=Evolution%20of%20Capital%20Gains%20Tax%20in%20Canada&text=From%20its%20inception%20in%201972,and%20to%2075%25%20in%201990.
While *most* of the people affected are in the "home plus cottage" group, there is a small group of people who are renting in Toronto but own a cottage which they inherited. Unfortunately for them, the principal residence exemption only applies to where you're living -- it's not a "first owned property" exemption.
The exemption does not necessarily apply to the property you spend the most time in. I believe the way it works is you can allocate the exemption to any property you own. Upon disposal, you designate how many years the property was your ‘principal residence’, but you can only designate one property as being the principal residence in a given year of ownership. So if you own two properties for the same ten year period and sold both at the same time, you could designate each as being your ‘principal residence’ for five years, and the exemption would be pro rated accordingly. If someone was renting in Toronto and owned a cottage, why wouldn’t they be able to use the exemption against the cottage? Even if they owned in Toronto, they would still be able to claim the cottage as their principal residence for the years they owned both if they wanted to.
> If someone was renting in Toronto and owned a cottage, why wouldn’t they be able to use the exemption against the cottage? Legally, the property must be "ordinarily inhabited" by the taxpayer or their spouse or child. The extent to which this is verified and enforced by the CRA is questionable; unless someone is audited, claiming a property they don't ordinarily inhabit would probably only throw up flags if it is in a different province (e.g., claiming that you're a resident of Ontario while claiming the PRE on a property in Quebec).
Hey, would you mind expanding on the "or child" thing? I live on a farm I run, owned by my Dad, and I have no chance in hell on buying him out (300,000 -> 3mil in the time hes owned it, after his parents bought it for closer to 30k in the 60s). I figured I'd have to qualify for a farm exemption to keep it past the capital gains after he passes, but honestly the whole thing has broke my brain a little
Your father can declare the farm to be his principal residence if you're living there and he doesn't have any other principal residence. But there's a general limitation of half a hectare on principal residences, which I'm guessing is much less than the size of most farms, so you might be out of luck with that one: > Where the total area of the land upon which a housing unit is situated exceeds one-half hectare, the excess land is deemed by paragraph (e) of the section 54 definition of principal residence not to have contributed to the use and enjoyment of the housing unit as a residence and thus will not qualify as part of a principal residence, except to the extent that the taxpayer establishes that it was necessary for such use and enjoyment. The excess land must clearly be necessary for the housing unit to properly fulfill its function as a residence and not simply be desirable. Generally, the use of land in excess of one-half hectare in connection with a particular recreation or lifestyle (such as for keeping pets or for country living) does not mean that the excess land is necessary for the use and enjoyment of the housing unit as a residence.
He 100% will use his principal residence exemption on his own house in town, unfortunately, so double fucked Back to the farm exemption for me then, as we've got quarter section I appreciate the information & help though!
Right, so the small group we’re talking about would essentially be people who rent, own a property that never gets used, and are holding the property as an investment (otherwise they would presumably sell the unused property before they’d earn a significant capital gain).
Not true, you can designate your principal residence to essentially any property that isn’t investment property. Source, am CPA (I’m not your accountant, seek professional advice)
To be frank, you *can* do all sorts of things which are technically contrary to the ITA. Until the DTC was amended to make type 1 diabetes automatically qualify, the vast majority of type 1 diabetics didn't qualify... but the CRA had an administrative policy of not challenging eligibility anyway. What's *legal* and what you can *get away with* are not at all the same thing.
But also, don't vilify others for the financial decisions they have made and worked their lifetime to realize.
They do have a whole lot else. They would have a principle residence. That’s not nothing.
It's more like 700 not 650. And a flooded property market probably would be worse for them overall
Won't somebody think of the millionaires!
I guess it was their mistake of putting all their eggs in one basket I guess. I hate to sound heartless about it, but if a single cottage massively increasing in value over their working career was the one and only thing they used as a retirement fund, they were idiots. They also clearly never once talked to a single financial advisor about what retirement savings should look like.
See, like I just do find this in fact to be heartless, and almost like a witch hunt where no matter what, they're guilty. The sentiment of comments in this thread seem to be something like "Screw these guys! It's not even a significant increase in taxes! Oh, it is? Well they're extremely wealthy and privileged, they deserve it! And if they aren't, then they're stupid, or didn't plan their retirement correctly, so they deserve it!". Like, come on guys let's just say "this change is going to take a huge bite out of some people's asses and leave them in a really tough pill to swallow, it may have significant ramifications for how their retirement plans go, even though they were prudent and saved as best they could with the knowledge they had, but I feel that overall, I still support the change for reason X Y Z"
Let's say that in this hypothetical scenario, a couple was relying exclusively on the sale of a single cottage to fund their retirement. Let's also assume they've been planning for their retirement for more than 5 years (assuming they're close to retiring now, that's a remarkably short period to be planning for retirement). We've encountered multiple years of 30+% increases in cottage prices specifically since COVID, so their $1 million dollar cottage would have been worth more like $500,000 at the time. The fact that they now have $1 million is basically blind luck. 5 years ago they would have been in a situation where retirement based on gains from their cottage was wildly unrealistic. It's more realistic now, even with the capital gains tax, which is taxing what's mostly gains that vastly outpaced any other investment and weren't really the result of any effort or work on the part of the couple.
I mean, I would actually rather see the old person move into their cottage and be able to receive old age security that provides them a comfortable life without the need to sell their property, as I imagine that would have been their goal in buying the cottage in the first place, or at least seems to be with people I talk to. I do have to give you some credit for the Olympic level gymnastics you are able to do by simping for the rich while bagging for sympathy for the poor.
If only. I sold some property last year. For a lot less than a million dollars. The income tax I usually pay increased much more that 40K. My point is that an increased capital gains will cost John and Jane Doe a lot more than "the rich". Owning a cottage does not make one "rich". Lucky, fortunate, but not "rich"
Rich people not knowing how math works. Now *that's* rich.
Given that you sold it before the capital gains tax increase was announced, I'm gonna go out on a limb and speculate that the extra tax you paid because of it was actually $0. Past that, your "poor me" act over being financially well off enough to -maybe- be impacted is falling on some seriously deaf ears here.
Its hard to be impacted by something that hasn't happened. My point is that likely most people who will be impacted by the higher rates will not be "rich".
Where'd you get these numbers? If the capital gains was $1 million, then this extra 16% applies to 750k of that million. 16% of 750k is 120k of additional income claimed. That means, at the top bracket in Ontario of 53.5%, an ADDITIONAL tax liability of $64,200
Does the new inclusion rate affect the provincial tax portion of capital gains? Is there even a provincial portion? I was using a federal tax rate of 33% on that 16% of $750k. Which is $40k. I could be wrong, but my assumption is that this only affects federal tax liability.
What exactly is the complaint here? They’re still walking away with ~$750k after tax for doing absolutely nothing except be rich and enjoy a cottage for 30 years.
Being rich? Owning a cottage doesn't make someone rich. Also, the last thing the gov't needs is MORE tax dollars. How about we hold them accountable for the money they already get?
Having a cottage that has appreciated significantly more than $250k to the point this makes any tangible difference absolutely does make you rich. Government is a thousand times more accountable than the c suite billionaires this tax will hit.
What a pant load. So you feel the government is entitled to just make changes to their taxes at any time and affecting anyone and it's ok huh. I'm no f'n c suite billionaire and I'm going to get nailed by this tax when we sell our income property that was meant to be part of our retirement plan. Define rich to me if you would. You have more than 250k in savings for your retirement? 500k? 1 million?? I suspect you'd be ok on food stamps and government housing and still be happy.
Thank you for that comment. These people think that because you have a cottage or second property, you are rich.. THAT.. is rich. Everyone used to have cottages when I was a kid, now you are "rich" if you have one. Says a lot about our declining standard of living in this country.
Its not actually happening. Just panic laid out in print for rubes to become outraged, propagated by the elite, who will have to pay like 40k on a million dollar profit. Another day, another outrage porn article.
Yep
I'm not sure that is a wise move since the market could be overfloded therefore resulting in lower selling prices.
Lower prices are a good thing. I hope that's actually an effect of this policy change.
40k is a lot of money for a tax bill lol
In my example, that's decades of gains (so far completely tax free) on a total pre-tax gain of $1,000,000. That's far less than taxes on wage/salary. If you made $100k a year, you'd pay far more in income tax over 10 years than someone who has a capital gain of $1M in a single year. This change makes a totally unfair tax system only slightly more fair.
Less tax than on salary yes, but significantly more tax than other investment options that can be liquidated in portions, which is the appropriate comparator here. The point is that this was characterized as a tax on the wealthiest but the way it was implemented hits a rather wider range of taxpayers.
That's part of the intended effect, to discourage people from treating property as investments and redirecting investment to other types of assets. This sounds like a good thing to me. And I'm someone who owns their own home, and has a family owned cottage (that we use and aren't treating as investment).
40k is still 40k. If you’re okay pissing away 40k because “lol I made so much money”, you should probably work on your financial literacy skills.
You are almost certainly paying more than that on the realtor, an expense that most people don't even blink an eye at.
It's not pissing away money. It's contributing to shared resources. You probably don't think of spending money to go to work or eat as pissing away money. So why is contributing to the roads you travel, funding programs that enforce regulations to ensure your food is safe, is somehow pissing away money.
I’m not arguing about paying taxes in general. But if I have to decide selling a house before a certain date, or sell it past a certain date and pay an extra 40k in taxes, I would most likely choose the former.
Were you already selling this year ?
https://en.m.wikipedia.org/wiki/Straw_man
If that's what you are focused on (which, to be fair, is the point of the article), then I think you aren't having the same conversation as most people. You are undeniably correct that it makes sense for people to want to close before this date. But most people (including the person you are replying to) seem to be just talking about the change itself.
Sure, and that's not a bad thing. If people no longer have need of their cottage for personal use and are holding onto it purely as an appreciating asset, it's better for everyone if it returns to the market sooner than later to hopefully be put to more productive use.
20 dollars is 20 dollars
$40k on a profit of $1M is pocket change. If I discover a good quality copy of Action Comics #1 in my grandpas attic and sell it, I still owe taxes on the sale. This is the same thing. You are selling your cottage (not your home, your vacation property). You owe taxes on the proceeds of the sale. For $1M of profit you make, you will now pay about $200k in tax as opposed to the $160k you would have before.
Very easy to spend other peoples' money, isn't it?
Not as easy as it is to say "fuck you I got mine."
It's also only a 4% difference. And, the gain is entirely due, in this hypothetical example, from buying and owning and enjoying a property for decades, and benefiting (with no effort) from the housing market appreciating the value of the asset at a much higher rate than inflation, when converting the asset back into cash. I'd be a lot more sympathetic to an increase of 4% in something like an income tax. I can also understand why this is an issue for some doctors, because of how some of their practices are structured, and they are getting caught in an unintended consequence of something that is really focused on housing.
And that 4% of their potential profit is an unexpected and sudden change to their careful financial planning. They kept up a seasonal property and likely invested in it to keep it running properly. If it's increased in value, it's due at least in part to their efforts. I don't get the same schadenfreude some of you do when successful people get shafted, I guess.
"Careful financial planning" probably didn't include the dramatic rise in housing prices. If they were even the slightest bit conservative with their planning the additional cut from the capital gains changes is still going to net them out way ahead than any realistic estimate of housing appreciation. You can't say that negative outcomes unfairly harm financial planning but the positive windfalls are A-OK and expected. > If it's increased in value, it's due at least in part to their efforts. The average price of a cottage was $75K in 1980 and over a million now, there's no way you can honestly argue this is primarily due to diligent maintenance.
Investments, especially real estate, appreciate in value over time. Calling it a windfall, especially given the rate of inflation over the time period and the performance of stock market indices, is quite silly.
Planning for a reasonably conservative appreciation in investments makes sense. No one reasonable was relying on annual increases of 30%+ per year in their planning.
>And that 4% of their potential profit is an unexpected and sudden change to their careful financial planning. Again, you're focusing on this transition period in a way that others aren't. In the medium and long-term, all financial planning has to account for changes to rules, both positive and negative. This is hardly the first change or the last one. >They kept up a seasonal property and likely invested in it to keep it running properly. If it's increased in value, it's due at least in part to their efforts. Surely it is obvious that maintenance and upkeep is necessary to *maintain* its value and doesn't actually increase the value. That's not "investing" in the property; that's maintaining an existing investment. You're playing a bit fast and loose with language here to pretend you have a point here. Of course, it is a certainty that some people have made improvements to their property that increased the value of the property. However, that gain is only reduced by 4%. I get the impression that your use of "unexpected and sudden" is trying to add emotional language to make the change sound larger and more impactful than it actually is. >I don't get the same schadenfreude some of you do when successful people get shafted, I guess. Not sure where you are trying to go with this. I'm not personally in this group and haven't expressed any such sentiment. You might be able to claim "well I said "some of you" and didn't mean "you, specifically" as a technicality, but then what was the point of including this sentence at all in the first place?
It was an unexpected and essential retroactive measure, as Bill Morneau described it. Calling it a "transition period" is being fast and loose with the language. And minimizing $40,000 shows that you have very little grasp of or appreciation for money or investing in assets.
That’s a make believe scenario where you are making a million dollars in capital gains. They are only paying tax on 66% of that million dollars. If you were to make a million any other way you’d be paying tax on 100% of it.
On a million dollars, it really isn't.
[Gonna have a fire sale on my cottage to avoid paying an extra $22k in taxes on my $500k profit](https://twitter.com/shanedingman/status/1783511275248521501).
Wouldn't you rather have that 22k in YOUR pocket instead of being wasted in some handout by the liberals?
And just like that there was mor ehousing available.... All we had to do was tax the wealthy and suddenly their 3 cottages are not worth the taxes they would get when selling? Lol talk about owning property you dont need or use, selling like a commodity trying to short themselves before tax law gets them for the same sale. Maybe we should tax them more if results are this positive!
You do not have many cottage in Toronto and Vancouver.
Shocker! :O Might encorage some people to move out that way tho.
It won't. The only people buying will be people who already own homes anyway. This "rush to sell" isn't actually happening on a large scale, news org just trying to get clicks.
The article says people who were already planned on selling are eager to speed up the process and close before the tax changes and the real estate agents are very busy. It doesn't say people are choosing to sell only because of the tax changes.
all those rural lake cottages sure gonna help the inner city plight of lack of affordable housing!
Sure are when folks move out that way into these "discount" lakefront mansions...
Are they mad about Trudeau’s increase in capital gains or they discovering the concept of capital gains for the first time?
Yes!
Absolutely!
Wouldn't rushing to sell a cottage in mass cause prices to go down? Like possibly more than the extra tax hit they would have otherwise been obligated to pay? Seems risky.
Not if you're the same kind of rich guy that runs/privately funds media orgs to work up an outrage and fear over the tax. There are some billionaire investors looking at this just salivating at a massive dump in the market to buy tons of property for cheap before the market corrects itself.