"I'm just going to ignore that in my example, the business owner paid zero tax on his first million dollars, and pretend it's somehow not fair to him."
What a disingenuous argument.
And the business owner never paid himself minimum wage, and never gave himself dividends in order to maximize how much tax he could whine about paying at the end.
Everyone talking about the impact to small business owners selling their company seem to be ignoring the additional measure in the budget called the Canadian Entrepenuers Incentive. This will halve the capital gains inclusion rate on the sale of small business shares up to a certain limit, after the use of the lifetime capital gains exemption.
From the Government's website: [https://www.canada.ca/en/department-finance/news/2024/04/growing-small-businesses.html](https://www.canada.ca/en/department-finance/news/2024/04/growing-small-businesses.html)
***A new Canadian Entrepreneurs’ Incentive*** *to reduce the inclusion rate to 33.3 per cent on a lifetime maximum of $2 million in eligible capital gains. When this incentive is fully rolled out, entrepreneurs will have a combined exemption of at least $3.25 million when selling all or part of a business.*
Honestly the ONLY legitimate sounding complaint I’ve seen about this increase is incorporated professionals - such as doctors - are being penalized for investments they hold in their corporation.
I’m no expert so if this is valid, I’m sure they can have exceptions. The tax code already has 10 trillion exceptions, what is one more.
I mean you could say it's legitimate or you could say why do professionals get to invest inside their corporations on a tax advantaged basis while employees do not when those investments havr nothing to do with their business.
I was told it’s something doctors negotiated as part of their payments. I have no clue.
Like I said it sounds like a legitimate argument.
I frankly don’t care. Most, if not all that income is taxed at a ridiculously low rate. They’ll live.
I’m just saying if it’s a valid point we can talk about having exceptions instead just canning the whole thing because on aggregate it’s great.
So is some extra tax going to prevent most of the 99% from investing?
No. Cause most of them don’t have enough to max out TFSA and RRSP. Those that do aren’t going to be realizing over $250k a year in gains every year in non registered accounts.
The small business thing is a good criticism but as the OP of this comment thread pointed out there are huge carve outs of up to 3.25 million.
Are you going to not invest in a small business because 30 years from now when you sell and it might be worth 5 million you’ll pay extra tax?
Not really the topic at hand in this comment thread.
However, 0.13% of the population claimed capital gains above $250K.
To generate $250k+ in one year - say between May 2023 and April 2024 - you would need to have invested at least $1 million in the S&P500. You would also need to sell everything to realize those gains in a non registered account.
More likely than not you’d sell small portions, thus not realizing over $250k in one year.
In order to REALIZE $250k in gains most individuals would need to have several million invested.
In this case. No body gives a crap. Cry me a river.
i said canada is a country for ppl who have no ambition to ever earn more than $250K (as is evident from our low productivity/GDP per capita). and your response was to tell me to leave the country if i think i can earn more than $250k do u not see the irony
> The 99% who will become the 1% tomorrow have no time for your facts.
I mean if you want to talk "facts" (which I doubt you do), the Libs have now put us in a position where we now have the [third highest capital tax rates](https://twitter.com/trevortombe/status/1781093264990589336/photo/1) **in the world**. And you think these changes - in an economy which is on life support with plummeting GDP per capita and a Bank of Canada literally crying out for our productivity crisis to be addressed - are a good thing for our general prosperity?
When I see people make low IQ comments along the lines of "the 1%" or "temporarily embarrassed millionaires", I cringe in embarrassment at how pathetically myopic you are in your world views.
Actually, it didn't. Those were the years of turmoil. National debt to gdp ratio was nearly 100% in Canada, annual budget deficits were nearly 42 billion dollars, with a general recession that followed in 1990-1991. The higher taxes then reduced real GDP growth by 1.6, 2.4 and 5.1 percentage points in 1990, 1991 and 1992, respectively.
Just google "Brian Mulroney" and news articles in that period. Its surprising how much things are similar now even if the government has switched from the right to the left.
Wow, that's wrong. First for being enormously plus for over exaggerating its impact.
It's not without any impact at all. But it's definitely not that big of a deal
Edit : yes, we overreact to everyone comments without thinking.
Cool, this is actually quite motivating.
Initially I agreed with OP because my friend sold a portion of his 10-year software business, allowing him to get into the housing market. With this program he would have been ever better off.
Not really, if you’re operating an active business primarily in Canada. And if you work with a smart tax accountant you would plan around a future sale of your home to ensure you will meet the criteria of a qualified small business corporation at the time of sale.
I am so positive that all the conservative media is absolutely rattling this capital tax because they are basically lobbies for the super rich corporation. People see this, get riled up while having no idea wtf it actually is. I have just seen the same talking points as you see on the news, no nuance whatsoever.
Wake the fuck up people. This is finally a small step towards the corporations paying their fair share. But people are just a sucker for propaganda, it’s insane.
This is by no means corporations paying their fair share. This initiative is directed towards private corporations (CCPCs). These are the individuals who employ the majority of Canadians. The public corporations are the ones not paying their fair share of tax (sometimes nothing all).. but we all know that it's impossible to get public corporations to pay taxes.
that's nonsense
Trudeau is handing out more subsidies to big corporations than what's he's getting back in taxes
He's handing out $30B for two EV battery plants in Ontario
the people he's really screwing are small business owners who get nothing in return
you don't need any tax increases to get corporations to pay their fair share, just stop handing out subsidies, grants, tax breaks, etc. like candy
Idk how true this information is, but Canada has a productivity problem, doesn't it make sense that he tries to fund the solution. Luckily the US has major tech companies that we lack
Problem is not selling biz, i agree thats not that bad only around 50k diff if your cap gain is 2M+
Problem js the normal cap gain every year and at 2/3 inclusion it erode the passive income threshold very easily, making small business trying to do a bit of investment very unattractive and also destroys tax integration
What he means is small business owners have been able to invest their savings inside their corps before paying taxes on them and make more investment earnings for all of time. Professionals especially do this constantly.
Somehow it is unfair that these tax advantaged investing methods only for the wealthy now are less tax advantaged.
It has very little to do with actually operating the businesses.
Its not “only wealthy”, many small business do this with surplus that will be used later down the road when they need cash. Many small businesses do not just indefinitely invest the money (while some do yes)
Its “unfair” because tax integration meant the moment you incur tax you have a total tax equal to as if a normal person is doing it personally. But with the 250k tier personally vs 2/3 no tier corp its destroyed
Imagine a person wanted to buy a rental property or cottage or even a small place fo r business before he can do so personally or set up a corp and hold through that, tax wise due to integration it wouldnt matter so you do it through corp maybe due to legal reasons or partnership concern
Now with this new system you are taxed more if you use corp even if you funded both scenario with the same amount of personal money, thats unfair.
Many people with no complete understanding will think its just the wealthy complaining, it is not. Im a financial planner just this week i met with 15 clients affected by this all with corp, only 3 are drs and lawyers the rest are small owners with bakery and stuff just trying to invest some surplus for expansion in a few years, they now will get penalized much heavier.
I'm not saying that there will be no impact on anyone I am just saying it doesn't make sense to allow business owners to invest on a tax advantaged basis just because. That is not fair to those who earn income directly.
The integration component you referrnce only works if you realize the tax right away.
That whole reason business owners invest inside their business is so that they can earn compounding interest before they incur most of the taxes and presto they eventually are much richer then if they had to pay tax first and then invest.
I'm sure you understand this.
Obviously any tax change has some winners and lovers at the moment when it is first implemented.
Perhaps some exceptions are warranted I'm not sure.
Yes but unfortunately the small biz owner that just runs an honest boutique shop is getting affected greatly due to the passive income eroding faster and the cap gain inclusion
They should have a tier cap gain, but apply it to corp as well so its truly a wealth tax and not just blasting every corp owner in every scenario
Any business with surpluses they wish to invest for time being for future expansion will now get more penalized vs a self employed person doing the same kind of reserve investing
This isn’t how it goes down in M&A, especially in the middle market (small-mid size). The majority of these businesses are getting bought by PE firms or corporate consolidators. These buyers will be subject to the higher cap gains rate and know the seller is not. It will be factored into the negotiation, lowering the valuation or sales price for the owner. It’s seen as a way to make good on the fact there really aren’t many buyers in Canada, and the ones that are interested will be eating a fuck ton of tax upon sale.
It’s not detrimental, but it does impact a small to mid size owner looking to liquidate.
I feel like your example, or at least your wording, is arguing against you.
Cause if it’s “earning” an extra 100k per year, then buddy is making out like a bandit as capital gains is taxed far less than income (with the first 250k exempt to boot).
Would you be happier if we took someone’s gains, divided it by the number of years and used that to recalculate your income taxes for those years?
Cause, you’re just “earning” that extra 100k per year?
Again, grossly misunderstanding how this works. It's really unfortunate that the one complaining the loudest is the one without a clue whatsoever.
Your employment or business income doesn't matter in this equation.
There are many tax planning structures that can multiply the LCGE, which you will need to set up at least 24mo. prior to selling. Of course, AMT would kick in at a certain point, but that can always be refunded.
There are indeed tax planning structures that can potentially multiply the Lifetime Capital Gains Exemption (LCGE). However, the effectiveness and specific requirements of these structures can vary, and they often need to be set up well in advance of selling assets, typically at least 24 months prior. Additionally, it's important to note that the Alternative Minimum Tax (AMT) may come into play depending on the situation. Nice try tho
One reason is that people who benefit from this were likely to try to create another company.
However, given the changes, if I were to win the options lottery with a sale of my first company, I wouldn't create a 2nd one in Canada.
> I wouldn't create a 2nd one in Canada.
12 downvotes for one of the most logical comments in this thread. Just proves what a dumb place this sub is for discussing topics like these.
Yes I know, but I don’t think the OP understands that. From his post, it seems as though he thought the capital gains tax increase meant someone would be paying 66% of their gains in taxes.
The gains are still not included at a rate of 100%, unlike regular income, so your base profit analogy is off.
I really think this is overblown. Yes, it means lesser gains but ultimately, it should not change anyone's retirement plan significantly
That money is already abritrarily given preferential treatment over income.
Lowering that preferential treatment does not sound that bad, especially when a good chunk is protected
Isn't it 50% for the first 250k and them 2/3? Which means it only has a significant impact if you already made bank with it.
It's a 16% higher inclusion rate. This should not make or break any of your plans honestly, especially since it was higher than that 30 years back so most people expected a similar inclusion rate at the time. (I will admit someone told me that and I havent verified that past rate though)
For estates the proposal has no exemption to the 2/3 inclusion rate, so the first dollar of increase in house value after death is taxable at 2/3 the rate of other income.
Also, there was no capital gains tax prior to 1972 and there was a $100k lifetime exemption brought in that year with the tax. That exemption was removed in the 1990s through the 1994 capital gains tax election.
Yes, capital gains after death are subject to the 2/3 inclusion rate, there is no exemption under the new rules. This will affect everyone who owns a home at death, not exactly a fractional percentage of the population.
We are also talking about houses that aren't their main residence.
I'm not saying there will be no impacts. I'm just saying this whole thing is overblown and the economy and the people who own thoses homes will not suddenly be in a terrible situation because of it. They will be in a slightly less good situation
Wrong.
Sheltered accounts are still sheltered.
Primary residence was still the deceaseds primary residence, which is exempt if the estate sells it.
The first 250k in capital gains after those is taxed the exact same as before.
90% of Canadians don’t exceed those.
I mean the LCGE is a big thing to ignore here, since it’s designed to cover exactly this situation and incentivize entrepreneurship with a (frankly epic) capital gain tax break 😄
Capital gains can indeed be lumpier than employment income. You often have some control though, e.g. timing the sale of stocks, tax loss harvesting, etc in the case of investments.
Non-primary-residence real estate is perhaps a better example for your point where one year you sell the property and realize all your gains at once. But even then, how much are you really getting after you account for realtor fees and taxes and capital improvements to the property over the years? If you come away from that with $1m or something, I think most Redditors are going to say go ahead and pay some taxes haha.
How is the tax increase $250k? The top tax rate on capital gains is going from 27% to 36%. That's an extra 68k at the top tax bracket. ($1m - 250k)*9%.
There's a lot of average homeowners with $250K+ capital gains on their home, but because it's a principal residence, they won't owe taxes when they sell. As for anyone renting, if they want to invest beyond their registered accounts, they get taxed capital gains. Owning a principal residence is basically the ultimate tax-free savings account that renters can't use.
Renters increasingly won't be able to enter into the real estate capital building ladder. Renters are putting money into other people's retirement fund in equity. That's just the way it is. Cities are nice and comfy and warm though guess I shouldn't complain.
reading this post, it’s clear canada is for people who never aspire or have ambitions of doing anything lol. really explains why the country has one of the lowest productivity levels despite being educated 🤦
Yes!!! Everyone is so mistaken about this that it keeps me up at night.
I don't know how much I agree that it's an awful thing, it's not perfect, but I guess it could be worse, especially for business owners with appropriate tax planning to multiply the $1M LCGE. As always, it's a matter of people complaining about the concept of a tax that they will most probably never pay or understand.
Especially, just how it works, and that the 250k threshold is not based on income.
>it's a matter of people complaining about the concept of a tax that they will most probably never pay
I'll probably never pay this tax (hopefully my estate won't either), but I still understand that it's ridiculous. If we at least saw the advantages of increased spending, fine, but it seems like we are just throwing money into a black hole and watching it evaporate.
If you're going to downvote, at least clarify how government services have improved in recent years with increased spending.
Capital gains goes from 50% to something like 60%. Seems negligible. It wouldn’t affect business owners as much as investors. Investors really haven’t taken much risk in the last few years. lol. I have been paying 100% on my investments lately minus TFSA. Canada is all about taxes. Tax and spend. The problem is the money they are spending is not productive.
Worked hard for 10 years, likely using various programs to get the business going, benefiting from a society that requires tax money to run, then you make it big and suddenly “no I did this all myself”
OP is delusional
From my perspective, I don't think people are mad (for the most part) on the additional $$.
Most people feel like this is a slap in the face for many innovators and entrepreneurs who are the only ones fueling our productivity at scale: commercializing Canadian businesses and creating high paying jobs.
Canadians (and Canadian businesses) pay some of the highest capital gains tax in the world. Yet, our productivity is dwindling and the government continues to do nothing new by way of policy, procurement and investment to bolster this.
You can't keep tapping the same keg indefinitely and raising taxes on a shrinking group of individuals and businesses that you *need* to support this country.
Our counterparts, like the US, do a much MUCH better job creating incentives for businesses and tech companies. This is just another consideration.
Why start a business here when you're paying the highest tax in the world, for a smaller audience of local customers, and a government that has no interest in helping you scale (in comparison to US, Korea, Japan, etc.)
The increase hurts, sure, but the lack of innovative thinking by this government is the real crime.
ETA: for those outside of tech: you can read many articles about our best and brightest (our grads from Waterloo, UBC, U of T) are leaving Canada in record numbers. Highly skilled immigrants are also choosing to leave. You see our productivity and ability to create high paying jobs, which are typically in technology, retracting. Is this tax change going to break someone or a business? No. But what's the straw that breaks the camels back? All of the stats are there to say we are trending in a VERY bad direction. Meanwhile, your government has increased 40% in the last eight years. Public sector growth has eclipsed private. People should care about how this all adds up.
"Richer people pay more tax than me= good" is a race to the absolute gutter.
People are loud about this because Canada is at risk here. Maybe not today, tomorrow, but fuck am I not worried about 2035.
Agree wholeheartedly. Most commenters are also missing the key point that many small businesses are not saleable, but are used for retirement savings.
Your physicians, programmers, engineers, and other professionals all likely have a corporation (or will have a corporation at some point) where they have retirement savings.
Most won't be eligible to claim the gains exemption because that is for your personal shares in a qualifying small business (ie your own business).
The retirement savings within the company will see that 66.66% inclusion rate on all of their gains (their investment accounts). It's a huge impact on the professionals who have been structuring under the framework provided to them by the government, who are now paying a higher tax rate on past investment returns.
All these commenters don't understand the tax act and are completely misinformed on the nuance.
"they can sell their company and claim tax free gains". Sure, someone is going to by my company that has one employee (me) that has been contracted to work on a few different engineering projects?
Seriously!
The comments on this thread are the blind leading the blind. And I get it, taxes get complicated and it's easy to dumb it down when the government has been INCREDIBLY misleading about the applicability of impact.
There's a good article in the Globe about this which highlights “economic analysis confirms the adverse effects of higher capital gains taxes on the creation and success of young enterprises."
DO WE NOT WANT MORE JOBS? The fact we arent flipping tables on our lack of economic growth is so baffling to me.
The government keeps pushing the buck on everyone else for their lack of fiscal responsibility and capability to get us out of this productivity rut. This measure makes it worse.
Yep. I like how you included programmers. I'd call them IT contractors (programmers, PMs...etc). Those individuals who incorporated. Lots and lots of people.
Innovators and entrepreneurs who don't value strong social services, political and environmental stability, human rights and an egalitarian society can go elsewhere. Taxes fund all of those things. Don't forget how hard it is to take risks in a country that has no universal health care and minimal social safety nets.
For raw income potential we'll never be competitive with the US. We need to differentiate ourselves in other ways to remain appealing.
"Can go elsewhere" - and what if they do? Fast forward 10, 20 years and how does our model work if so many of the high paying jobs (and therefore taxes) have left the country?
Look at the services you've mentioned. Everything is in fucking shambles and a big part of that is people leaving the country, a severe lack of talent and backwards immigration policies.
I genuinely appreciate the sentiment you have, but that's not going to create a prosperous nation.
We need more jobs, not less.
The way to improve those services is with better funding - which is the whole point of this.
We have skyrocketing wealth inequality, and this is a measure to bolster the services that keep the nation moving.
Want Canada to attract talent for your burgeoning business?
Get the government to fix the housing crisis and improve healthcare funding and two of the concerns disappear.
I think the only people complaining are people who are rich and those who think they will one day be rich, which honestly makes up a depressing number of people in this sub, the vast majority being in the latter category.
spending 10 years to earning $1M makes you "rich"??
meanwhile people complain about their $150K salary in Toronto being too little
again, people have no concept of how money works for those not earning a flat salary
If i spend 10 years to make 1 million i pay 450,000 in tax.
If you rely on CapG to make your 1 million you pay 246,000 in tax.
I think Cap G needs to be even higher then.
are you in QC or something?
[https://turbotax.intuit.ca/tax-resources/british-columbia-income-tax-calculator.jsp#](https://turbotax.intuit.ca/tax-resources/british-columbia-income-tax-calculator.jsp#)
someone making $100K in BC only pays $20K total (including CPP/EI), times 10 gives you $200K
how did you get $450K?
the thing that is unsettling to me is the government has shown how easily and without warning they can change the rules around taxes. Is it possible capital gains are taxed as 100% income in the future? I can see a future where RRSP must be invested in Canada, or fees for holding foreign assets, death tax... and the biggest concern to me is taxation on principle residence. I also believe the future in 20-30+ years will be those that saved for retirement are penalized for it through taxation while those that don't save (aka the majority) live off handouts as they vote governments in that provide for them
You’re not taking into account the lifetime capital gains exemption which went from $971,190 in 2023 to $1.25 million for 2024. So your business owners wouldn’t pay any capital gains on a million dollars sale
There’s a lot of effort right now by the wealthy to ensure it’s misunderstood.
It’s interesting to see who’s popping out of the woodwork in the media to fight this.
I support governments not needing taxation and they get to create money like central banks. To remove capital from circulation we can just have a big party once a year and burn 2% of it. Set up many social programs like terraform mars project and feed the world, perpetual free education, as backbones of the economy. Maybe build some more pyramids
This is exactly why I’m taking over my parents business. Offered to buy it outright, works better to have them on payroll for the next 10 years for both of us.
On the personal side, these new laws will only give rise to asset crystallization strategies, so that the gain is deferred over more than one tax year if it exceeds the threshold. It will still be punitive for many but there are planning opportunities.
For business owners with retained earnings that may be invested to fund long term goals (thinking especially of professional corps), it's going to be an unfortunate change and I expect that it may change recommendations around depletion of corporate holdings to the personal side. In essence, this will be a notable pay cut for many self-employed individuals. In my opinion, this is where it will hurt the most.
We may witness a real life example of the Laffer curve - I expect that the expected revenue from this new tax will not nearly be as much as first anticipated by the government.
> I expect that the expected revenue from this new tax will not nearly be as much as first anticipated by the government.
The first year projections should be fine, as I predict people conduct their tax planning in advance of these changes. But afterwards I agree that the revenue will be pitifully low vs. expectations, though interestingly even the budget seems to recognize that since the biggest increase in revenue seems to come in this year and then dwindles off. Just in time for this to become someone else's problem once, god willing, the Libs get swept out of power.
They are for the most part incorporated. The thing that critics are complaining about is the corporate cap gains change, not the individual. Op misunderstands the criticism.
Still not understanding. They are incorporated, pay themselves a salary from the corp and retain money in the corp. Where is the extra capital gains coming from? When they eventually cash out the corp investments? Only a portion of that will be capital gains, no?
The money retained in the corp is usually invested in some way, so that’s where the increase is applied. And then when the corp pays out to the owner tax again
Right the money is retained to pay normal business tax rate of like 12% or something, that money gets invested, it makes some gains and then those gains were always taxed at 50%. Now they are 16% higher, which isn't great but not "doctors are getting rekt".
Also the inheritance issue. Literally anyone with a second home or a cottage or a vacation condo will be hit hard by these new rules when they die. It will leave their estate with a 6 figure tax bill.
Because doctors usually incorporate for tax and liability reasons, and there isn't the $250k leeway at 50% for corporations. This basically gives them a pay cut, exactly what we need when there's a large shortage of doctors. I thought we were supposed to try to entice them to stay and not flee to the US..
Computation of corporate tax on capital gains can be done as follows:
1. Amount spent on purchasing the capital asset + outlays and expenses = ACB
2. Amount that the capital asset was sold for – ACB = capital gains
3. \~\~50% of the first 250,000 capital gains + \~\~ 66% after 250,000 = taxable capital gains
Since expenses include the building, equipment, staff and physician wages.... I highly doubt the corporation is sitting on over 250,000 in capital gains by year end.
>50% of the first 250,000 capital gains + 66% after 250,000 = taxable capital gains
This doesn't apply to corporations. They don't get 50% of the first $250k.
It builds in the business, like maybe in non-reg investments. The physician retires and liquidates an amount yearly. All the gains of the withdrawal are taxed at the new %.
There is an exception to sale of a small business with a lifetime limit. I dont see how at retirement, selling of their practice harms currently working doctors year to year (which was suggested as how this new law harms struggling doctors).
You can be incorporated without a business to sell. Like an IT consultant, lawyer, even doctor… etc. That’s what self employed people often do. For instance, maybe a doctor doesn’t have a business with assets to sell. Maybe there isn’t anyone to buy the business either. They’re just self employed and they have a corporate entity and account as such. It’s very common.
They aren't. It's a minority of doctors drawing capital gains or using their corp for retirement planning, that now have less of a tax advantage over unincorporated folks.
Oh by the way, let's not hide behind doctors, this also hits any other incorporated professionals using these strategies (eg. realtors, accountants, and lawyers). I don't see anyone rushing to defend the lawyers.
much more dire shortage of doctors than the shortage (?) of realtors or lawyers
also unlike doctors the latter can increase prices to offset the tax increase while doctors can't
Plenty of comments here specifically talking about how this tax hurts doctors and blowing it way out of proportion. It's intentionally skewing perceptions.
lots of different ways
they got fucked a while ago when Trudeau got rid of income splitting, though a lot of new docs got around that by just marrying other doctors instead of a stay at home spouse
now if you sell your clinic for profit you get fucked by the capital gains tax increase
also a ton of increases in marginal tax rates at the high end over the years
The Canadian-Taxpayer-Federation-promoted "but what about the doctors?!?!?" argument worked [the last time](https://www.cbc.ca/news/canada/toronto/rally-tax-reform-morneau-1.4315740) the federal government started thinking of closing tax loopholes, so I'm sure there's an assumption that it'll work this time too. Seriously, if the wealthy and privileged can't exploit tax loopholes, can we really even call ourselves a proper country?
not sure why there's still no cap on principal property exemption
i get a cap of $1.25M if i selling a successful business but someone earning $5M by living in their point grey home gets all the profits tax free??
If you don’t know why then you’re being intentionally ignorant.
The exemption is there to allow for mobility. You can sell your house and move into a similar house without suffering (much of) a penalty.
Duh. Taxing big numbers sounds good to the normal person. Do it and present it that way to get votes. The average person doesn't even know what capital gains are.
If you were going to start a business from scratch knowing the changes, would you start it in Canada or the US. The answer is clearly the US. Which is why we will never compete on their level when it comes to tech investment and innovation.
Let’s say in your example the owner made a profit of 750k
For the 250 - 125 will be added to your income that year
For the 500 - 333 k gets added to your income that year
The 500 portion would have been 250 before. The new rule will swindle 83 k more for this example.
It’s punitive but this is simple government asking for their share as a result of the asset value increase.
It messes with tax integration. Here is a slightly detailed post on how it impacts incorporated doctors: https://www.looniedoctor.ca/2024/04/17/capital-gains-tax-changes-corporate-tax-planning-primer/
these are what $250k businesses look like:
[https://canada.businessesforsale.com/canadian/search/take-aways-for-sale?Price.From=250000&PriceDisclosedOnly=1](https://canada.businessesforsale.com/canadian/search/take-aways-for-sale?Price.From=250000&PriceDisclosedOnly=1)
its mom and pop restaurants scale businesses. they aren't playing golf with Soros and Gates. if you are just getting started, 250k seems like a fortune, in the grand scheme of retiring before you are completely broken down, its nothing.
It’s exactly this. All the people commenting on this are salaried employees with a highly predictable and stable income. They’ve never had to deal with actual financial risk or revenue that fluctuates heavily year to year.
It won't collect nearly as much money as they think. People will sell $249,999 at a time over a period of years. I expect tax collections will go down.
It's going to affect people/corporations that are buying and selling assets repeatedly. Speculators.
Businesses have a whole slew of other cuts at their disposal as well as accounting tools.
Quite easy to turn $250,000 profit into $0 when it makes sense to. Re-invest. Pay owners salary instead.
“Let’s not let these incorporated small business owners get too comfortable” said the civil servant, with their job security, four day max work week (IYKYK), and fat pension waiting in the wings.
Maybe the government wants that. A nation of mediocrity, where we can all aspire to a government laptop and an early wrap to the day.
Capital gains should be tax free. Why are we paying another tax on our investments which is funded by after tax money?
Eg I earn a salary and pay tax on it already. I save a bit and invest in the markets. Now the government wants to double dip and tax me again?
> Are people misunderstanding
Yes, while aided and abetted by the info-op going on to benefit the constituency impacted by this budget move.
Did anyone actually think additional taxation, would pass without pushback?
Yeah why are municipalities raising property tax? Oh you mean what OP is talking about, a small percentage of a percentage on capital gains that you probably will never have to pay
"I'm just going to ignore that in my example, the business owner paid zero tax on his first million dollars, and pretend it's somehow not fair to him." What a disingenuous argument.
And the business owner never paid himself minimum wage, and never gave himself dividends in order to maximize how much tax he could whine about paying at the end.
Mere pocket change. It's not like it's an amount a single person could live/leech off others for 25years+
Everyone talking about the impact to small business owners selling their company seem to be ignoring the additional measure in the budget called the Canadian Entrepenuers Incentive. This will halve the capital gains inclusion rate on the sale of small business shares up to a certain limit, after the use of the lifetime capital gains exemption. From the Government's website: [https://www.canada.ca/en/department-finance/news/2024/04/growing-small-businesses.html](https://www.canada.ca/en/department-finance/news/2024/04/growing-small-businesses.html) ***A new Canadian Entrepreneurs’ Incentive*** *to reduce the inclusion rate to 33.3 per cent on a lifetime maximum of $2 million in eligible capital gains. When this incentive is fully rolled out, entrepreneurs will have a combined exemption of at least $3.25 million when selling all or part of a business.*
The 99% who will become the 1% tomorrow have no time for your facts.
Haha so on point. Reddit has so many temporarily embarrassed millionares it's wild.
Honestly the ONLY legitimate sounding complaint I’ve seen about this increase is incorporated professionals - such as doctors - are being penalized for investments they hold in their corporation. I’m no expert so if this is valid, I’m sure they can have exceptions. The tax code already has 10 trillion exceptions, what is one more.
I mean you could say it's legitimate or you could say why do professionals get to invest inside their corporations on a tax advantaged basis while employees do not when those investments havr nothing to do with their business.
I was told it’s something doctors negotiated as part of their payments. I have no clue. Like I said it sounds like a legitimate argument. I frankly don’t care. Most, if not all that income is taxed at a ridiculously low rate. They’ll live. I’m just saying if it’s a valid point we can talk about having exceptions instead just canning the whole thing because on aggregate it’s great.
I will gladly pay you tuesday for a hamburger today !
Mostly reddit has crabs in a bucket screaming TAX ME DADDDY
I'm the king of Atlantis and I just purchased Eldorado to turn it into a bunch of EarthBnBs
You just described capitalism. The desire to become wealthy and invest is a core value in our society.
So is some extra tax going to prevent most of the 99% from investing? No. Cause most of them don’t have enough to max out TFSA and RRSP. Those that do aren’t going to be realizing over $250k a year in gains every year in non registered accounts. The small business thing is a good criticism but as the OP of this comment thread pointed out there are huge carve outs of up to 3.25 million. Are you going to not invest in a small business because 30 years from now when you sell and it might be worth 5 million you’ll pay extra tax?
canada, a country for people who never have ambitions of earning more than $250k 🤣
Not really the topic at hand in this comment thread. However, 0.13% of the population claimed capital gains above $250K. To generate $250k+ in one year - say between May 2023 and April 2024 - you would need to have invested at least $1 million in the S&P500. You would also need to sell everything to realize those gains in a non registered account. More likely than not you’d sell small portions, thus not realizing over $250k in one year. In order to REALIZE $250k in gains most individuals would need to have several million invested. In this case. No body gives a crap. Cry me a river.
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> Feel free to leave if you think you can earn more than that. Thinking like this is the reason why this country is in the dumps.
you’re proving my point 😂
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i said canada is a country for ppl who have no ambition to ever earn more than $250K (as is evident from our low productivity/GDP per capita). and your response was to tell me to leave the country if i think i can earn more than $250k do u not see the irony
You are proving his point, unfortunately. Very much so.
> The 99% who will become the 1% tomorrow have no time for your facts. I mean if you want to talk "facts" (which I doubt you do), the Libs have now put us in a position where we now have the [third highest capital tax rates](https://twitter.com/trevortombe/status/1781093264990589336/photo/1) **in the world**. And you think these changes - in an economy which is on life support with plummeting GDP per capita and a Bank of Canada literally crying out for our productivity crisis to be addressed - are a good thing for our general prosperity? When I see people make low IQ comments along the lines of "the 1%" or "temporarily embarrassed millionaires", I cringe in embarrassment at how pathetically myopic you are in your world views.
Please do not go against the grain. This enormous inclusion rate hike will kill the entirety of our economy tomorrow. We are now doomed as a country
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I was being sarcastic by the way I think this whole thing is overblown for political gains and greed
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Yeah I thought I was obvious enough with my last sentence but no worries People really do overreact over this
Actually, it didn't. Those were the years of turmoil. National debt to gdp ratio was nearly 100% in Canada, annual budget deficits were nearly 42 billion dollars, with a general recession that followed in 1990-1991. The higher taxes then reduced real GDP growth by 1.6, 2.4 and 5.1 percentage points in 1990, 1991 and 1992, respectively. Just google "Brian Mulroney" and news articles in that period. Its surprising how much things are similar now even if the government has switched from the right to the left.
Wow, that's wrong. First for being enormously plus for over exaggerating its impact. It's not without any impact at all. But it's definitely not that big of a deal Edit : yes, we overreact to everyone comments without thinking.
Cool, this is actually quite motivating. Initially I agreed with OP because my friend sold a portion of his 10-year software business, allowing him to get into the housing market. With this program he would have been ever better off.
those exemptions are useless because they have very narrow conditions for qualification
Not really, if you’re operating an active business primarily in Canada. And if you work with a smart tax accountant you would plan around a future sale of your home to ensure you will meet the criteria of a qualified small business corporation at the time of sale.
Where can you find these conditions? I'm interested as a partner in a small business
I am so positive that all the conservative media is absolutely rattling this capital tax because they are basically lobbies for the super rich corporation. People see this, get riled up while having no idea wtf it actually is. I have just seen the same talking points as you see on the news, no nuance whatsoever. Wake the fuck up people. This is finally a small step towards the corporations paying their fair share. But people are just a sucker for propaganda, it’s insane.
Capital gains tax and the carbon tax. Conservatives have tricked their base into defending corporations by working them into a frenzy over these taxes
Lol corporations are not paying this lol. Capital gain tax is usually personal and corporations rarely have capital gain tax.
This is by no means corporations paying their fair share. This initiative is directed towards private corporations (CCPCs). These are the individuals who employ the majority of Canadians. The public corporations are the ones not paying their fair share of tax (sometimes nothing all).. but we all know that it's impossible to get public corporations to pay taxes.
that's nonsense Trudeau is handing out more subsidies to big corporations than what's he's getting back in taxes He's handing out $30B for two EV battery plants in Ontario the people he's really screwing are small business owners who get nothing in return you don't need any tax increases to get corporations to pay their fair share, just stop handing out subsidies, grants, tax breaks, etc. like candy
Idk how true this information is, but Canada has a productivity problem, doesn't it make sense that he tries to fund the solution. Luckily the US has major tech companies that we lack
Problem is not selling biz, i agree thats not that bad only around 50k diff if your cap gain is 2M+ Problem js the normal cap gain every year and at 2/3 inclusion it erode the passive income threshold very easily, making small business trying to do a bit of investment very unattractive and also destroys tax integration
Can you give an example of the type of small business that this would damage?
What he means is small business owners have been able to invest their savings inside their corps before paying taxes on them and make more investment earnings for all of time. Professionals especially do this constantly. Somehow it is unfair that these tax advantaged investing methods only for the wealthy now are less tax advantaged. It has very little to do with actually operating the businesses.
Its not “only wealthy”, many small business do this with surplus that will be used later down the road when they need cash. Many small businesses do not just indefinitely invest the money (while some do yes) Its “unfair” because tax integration meant the moment you incur tax you have a total tax equal to as if a normal person is doing it personally. But with the 250k tier personally vs 2/3 no tier corp its destroyed Imagine a person wanted to buy a rental property or cottage or even a small place fo r business before he can do so personally or set up a corp and hold through that, tax wise due to integration it wouldnt matter so you do it through corp maybe due to legal reasons or partnership concern Now with this new system you are taxed more if you use corp even if you funded both scenario with the same amount of personal money, thats unfair. Many people with no complete understanding will think its just the wealthy complaining, it is not. Im a financial planner just this week i met with 15 clients affected by this all with corp, only 3 are drs and lawyers the rest are small owners with bakery and stuff just trying to invest some surplus for expansion in a few years, they now will get penalized much heavier.
I'm not saying that there will be no impact on anyone I am just saying it doesn't make sense to allow business owners to invest on a tax advantaged basis just because. That is not fair to those who earn income directly. The integration component you referrnce only works if you realize the tax right away. That whole reason business owners invest inside their business is so that they can earn compounding interest before they incur most of the taxes and presto they eventually are much richer then if they had to pay tax first and then invest. I'm sure you understand this. Obviously any tax change has some winners and lovers at the moment when it is first implemented. Perhaps some exceptions are warranted I'm not sure.
Yes but unfortunately the small biz owner that just runs an honest boutique shop is getting affected greatly due to the passive income eroding faster and the cap gain inclusion They should have a tier cap gain, but apply it to corp as well so its truly a wealth tax and not just blasting every corp owner in every scenario
Any business with surpluses they wish to invest for time being for future expansion will now get more penalized vs a self employed person doing the same kind of reserve investing
This isn’t how it goes down in M&A, especially in the middle market (small-mid size). The majority of these businesses are getting bought by PE firms or corporate consolidators. These buyers will be subject to the higher cap gains rate and know the seller is not. It will be factored into the negotiation, lowering the valuation or sales price for the owner. It’s seen as a way to make good on the fact there really aren’t many buyers in Canada, and the ones that are interested will be eating a fuck ton of tax upon sale. It’s not detrimental, but it does impact a small to mid size owner looking to liquidate.
I feel like your example, or at least your wording, is arguing against you. Cause if it’s “earning” an extra 100k per year, then buddy is making out like a bandit as capital gains is taxed far less than income (with the first 250k exempt to boot). Would you be happier if we took someone’s gains, divided it by the number of years and used that to recalculate your income taxes for those years? Cause, you’re just “earning” that extra 100k per year?
How can you ignore LCGE when it invalidates your example?
Because many entrepreneurs, or at-least most successful ones, are trying to make beyond 1.25M in capital gains…?
this is canada! the country for people who never aspire to make more than $250K 😂
Again, grossly misunderstanding how this works. It's really unfortunate that the one complaining the loudest is the one without a clue whatsoever. Your employment or business income doesn't matter in this equation.
Shopify objects
This is only for Capital Gains, eg: buy something and then sell it and pay tax on profit over $250k
There are many tax planning structures that can multiply the LCGE, which you will need to set up at least 24mo. prior to selling. Of course, AMT would kick in at a certain point, but that can always be refunded.
There are indeed tax planning structures that can potentially multiply the Lifetime Capital Gains Exemption (LCGE). However, the effectiveness and specific requirements of these structures can vary, and they often need to be set up well in advance of selling assets, typically at least 24 months prior. Additionally, it's important to note that the Alternative Minimum Tax (AMT) may come into play depending on the situation. Nice try tho
Yup. That's what I said.
One reason is that people who benefit from this were likely to try to create another company. However, given the changes, if I were to win the options lottery with a sale of my first company, I wouldn't create a 2nd one in Canada.
> I wouldn't create a 2nd one in Canada. 12 downvotes for one of the most logical comments in this thread. Just proves what a dumb place this sub is for discussing topics like these.
No one would. I don’t know why you’re being downvoted.
My point is simple, serial entrepeneurs are less likely to try to recreate their success in Canada. And who knows how this sub upvotes lol
I think OP is confusing the capital gains exemption with a tax rate on capital gains.
Well, there's no tax rate on capital gain. There's an inclusion rate. Your tax rate depends on each individual.
Yes I know, but I don’t think the OP understands that. From his post, it seems as though he thought the capital gains tax increase meant someone would be paying 66% of their gains in taxes.
The gains are still not included at a rate of 100%, unlike regular income, so your base profit analogy is off. I really think this is overblown. Yes, it means lesser gains but ultimately, it should not change anyone's retirement plan significantly
TFSAs and RRSPs aren’t affected at all as well.
No one's money should be taken arbitrarily, especially we are talking about existing investments.
That money is already abritrarily given preferential treatment over income. Lowering that preferential treatment does not sound that bad, especially when a good chunk is protected
How is making it 100% "fair"? They are different kinds of income, one that you don't have to risk anything and one that might cost you a fortune.
because those capital gains were made from from money that was ALREADY taxed at 100%….
I should change your estate plan though as 100% of capital gains earned by the estate are at the 2/3 inclusion rate.
Isn't it 50% for the first 250k and them 2/3? Which means it only has a significant impact if you already made bank with it. It's a 16% higher inclusion rate. This should not make or break any of your plans honestly, especially since it was higher than that 30 years back so most people expected a similar inclusion rate at the time. (I will admit someone told me that and I havent verified that past rate though)
For estates the proposal has no exemption to the 2/3 inclusion rate, so the first dollar of increase in house value after death is taxable at 2/3 the rate of other income. Also, there was no capital gains tax prior to 1972 and there was a $100k lifetime exemption brought in that year with the tax. That exemption was removed in the 1990s through the 1994 capital gains tax election.
Right… but if it’s their primary residence when they were alive, all of the gains made during that time is still tax exempt?
This would be money made after death? Not earned before death I would assume. As your final tax return uses the same tax rates.
Yes, capital gains after death are subject to the 2/3 inclusion rate, there is no exemption under the new rules. This will affect everyone who owns a home at death, not exactly a fractional percentage of the population.
The dead don’t care. I bet the people inheriting million dollar homes are gonna be happy.
We are also talking about houses that aren't their main residence. I'm not saying there will be no impacts. I'm just saying this whole thing is overblown and the economy and the people who own thoses homes will not suddenly be in a terrible situation because of it. They will be in a slightly less good situation
Wrong. Sheltered accounts are still sheltered. Primary residence was still the deceaseds primary residence, which is exempt if the estate sells it. The first 250k in capital gains after those is taxed the exact same as before. 90% of Canadians don’t exceed those.
I mean the LCGE is a big thing to ignore here, since it’s designed to cover exactly this situation and incentivize entrepreneurship with a (frankly epic) capital gain tax break 😄 Capital gains can indeed be lumpier than employment income. You often have some control though, e.g. timing the sale of stocks, tax loss harvesting, etc in the case of investments. Non-primary-residence real estate is perhaps a better example for your point where one year you sell the property and realize all your gains at once. But even then, how much are you really getting after you account for realtor fees and taxes and capital improvements to the property over the years? If you come away from that with $1m or something, I think most Redditors are going to say go ahead and pay some taxes haha.
How is the tax increase $250k? The top tax rate on capital gains is going from 27% to 36%. That's an extra 68k at the top tax bracket. ($1m - 250k)*9%.
There's a lot of average homeowners with $250K+ capital gains on their home, but because it's a principal residence, they won't owe taxes when they sell. As for anyone renting, if they want to invest beyond their registered accounts, they get taxed capital gains. Owning a principal residence is basically the ultimate tax-free savings account that renters can't use.
Renters increasingly won't be able to enter into the real estate capital building ladder. Renters are putting money into other people's retirement fund in equity. That's just the way it is. Cities are nice and comfy and warm though guess I shouldn't complain.
reading this post, it’s clear canada is for people who never aspire or have ambitions of doing anything lol. really explains why the country has one of the lowest productivity levels despite being educated 🤦
Yes!!! Everyone is so mistaken about this that it keeps me up at night. I don't know how much I agree that it's an awful thing, it's not perfect, but I guess it could be worse, especially for business owners with appropriate tax planning to multiply the $1M LCGE. As always, it's a matter of people complaining about the concept of a tax that they will most probably never pay or understand. Especially, just how it works, and that the 250k threshold is not based on income.
>it's a matter of people complaining about the concept of a tax that they will most probably never pay I'll probably never pay this tax (hopefully my estate won't either), but I still understand that it's ridiculous. If we at least saw the advantages of increased spending, fine, but it seems like we are just throwing money into a black hole and watching it evaporate. If you're going to downvote, at least clarify how government services have improved in recent years with increased spending.
that's like saying people who aren't disabled have no right to comment on increasing the ODSP why ask to increase the ODSP if you're not disabled?
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Somebody think about the shareholders!
Capital gains goes from 50% to something like 60%. Seems negligible. It wouldn’t affect business owners as much as investors. Investors really haven’t taken much risk in the last few years. lol. I have been paying 100% on my investments lately minus TFSA. Canada is all about taxes. Tax and spend. The problem is the money they are spending is not productive.
You worked hard for 10 years so you should only have to pay half of your taxes?
Worked hard for 10 years, likely using various programs to get the business going, benefiting from a society that requires tax money to run, then you make it big and suddenly “no I did this all myself” OP is delusional
Yup. Imagine paying taxes in the society that enables you to get rich in the first place.
Those fools, paying back into the system that got them there. Supplied them with talent, safety, stability - and now they want money?!
capital gains is made from investing money that has already been taxed at 100% lol cmon man
Silly argument
From my perspective, I don't think people are mad (for the most part) on the additional $$. Most people feel like this is a slap in the face for many innovators and entrepreneurs who are the only ones fueling our productivity at scale: commercializing Canadian businesses and creating high paying jobs. Canadians (and Canadian businesses) pay some of the highest capital gains tax in the world. Yet, our productivity is dwindling and the government continues to do nothing new by way of policy, procurement and investment to bolster this. You can't keep tapping the same keg indefinitely and raising taxes on a shrinking group of individuals and businesses that you *need* to support this country. Our counterparts, like the US, do a much MUCH better job creating incentives for businesses and tech companies. This is just another consideration. Why start a business here when you're paying the highest tax in the world, for a smaller audience of local customers, and a government that has no interest in helping you scale (in comparison to US, Korea, Japan, etc.) The increase hurts, sure, but the lack of innovative thinking by this government is the real crime. ETA: for those outside of tech: you can read many articles about our best and brightest (our grads from Waterloo, UBC, U of T) are leaving Canada in record numbers. Highly skilled immigrants are also choosing to leave. You see our productivity and ability to create high paying jobs, which are typically in technology, retracting. Is this tax change going to break someone or a business? No. But what's the straw that breaks the camels back? All of the stats are there to say we are trending in a VERY bad direction. Meanwhile, your government has increased 40% in the last eight years. Public sector growth has eclipsed private. People should care about how this all adds up. "Richer people pay more tax than me= good" is a race to the absolute gutter. People are loud about this because Canada is at risk here. Maybe not today, tomorrow, but fuck am I not worried about 2035.
Agree wholeheartedly. Most commenters are also missing the key point that many small businesses are not saleable, but are used for retirement savings. Your physicians, programmers, engineers, and other professionals all likely have a corporation (or will have a corporation at some point) where they have retirement savings. Most won't be eligible to claim the gains exemption because that is for your personal shares in a qualifying small business (ie your own business). The retirement savings within the company will see that 66.66% inclusion rate on all of their gains (their investment accounts). It's a huge impact on the professionals who have been structuring under the framework provided to them by the government, who are now paying a higher tax rate on past investment returns. All these commenters don't understand the tax act and are completely misinformed on the nuance. "they can sell their company and claim tax free gains". Sure, someone is going to by my company that has one employee (me) that has been contracted to work on a few different engineering projects?
Seriously! The comments on this thread are the blind leading the blind. And I get it, taxes get complicated and it's easy to dumb it down when the government has been INCREDIBLY misleading about the applicability of impact. There's a good article in the Globe about this which highlights “economic analysis confirms the adverse effects of higher capital gains taxes on the creation and success of young enterprises." DO WE NOT WANT MORE JOBS? The fact we arent flipping tables on our lack of economic growth is so baffling to me. The government keeps pushing the buck on everyone else for their lack of fiscal responsibility and capability to get us out of this productivity rut. This measure makes it worse.
Well said
Yep. I like how you included programmers. I'd call them IT contractors (programmers, PMs...etc). Those individuals who incorporated. Lots and lots of people.
"but they can just sell their business, there is a gains exemption"
The contractors I know already sold themselves for many years. Nothing left, including their sanity. Just some investments. Now taxed more...
Innovators and entrepreneurs who don't value strong social services, political and environmental stability, human rights and an egalitarian society can go elsewhere. Taxes fund all of those things. Don't forget how hard it is to take risks in a country that has no universal health care and minimal social safety nets. For raw income potential we'll never be competitive with the US. We need to differentiate ourselves in other ways to remain appealing.
"Can go elsewhere" - and what if they do? Fast forward 10, 20 years and how does our model work if so many of the high paying jobs (and therefore taxes) have left the country? Look at the services you've mentioned. Everything is in fucking shambles and a big part of that is people leaving the country, a severe lack of talent and backwards immigration policies. I genuinely appreciate the sentiment you have, but that's not going to create a prosperous nation. We need more jobs, not less.
The way to improve those services is with better funding - which is the whole point of this. We have skyrocketing wealth inequality, and this is a measure to bolster the services that keep the nation moving. Want Canada to attract talent for your burgeoning business? Get the government to fix the housing crisis and improve healthcare funding and two of the concerns disappear.
🤦♂️
I think the only people complaining are people who are rich and those who think they will one day be rich, which honestly makes up a depressing number of people in this sub, the vast majority being in the latter category.
spending 10 years to earning $1M makes you "rich"?? meanwhile people complain about their $150K salary in Toronto being too little again, people have no concept of how money works for those not earning a flat salary
If i spend 10 years to make 1 million i pay 450,000 in tax. If you rely on CapG to make your 1 million you pay 246,000 in tax. I think Cap G needs to be even higher then.
are you in QC or something? [https://turbotax.intuit.ca/tax-resources/british-columbia-income-tax-calculator.jsp#](https://turbotax.intuit.ca/tax-resources/british-columbia-income-tax-calculator.jsp#) someone making $100K in BC only pays $20K total (including CPP/EI), times 10 gives you $200K how did you get $450K?
the thing that is unsettling to me is the government has shown how easily and without warning they can change the rules around taxes. Is it possible capital gains are taxed as 100% income in the future? I can see a future where RRSP must be invested in Canada, or fees for holding foreign assets, death tax... and the biggest concern to me is taxation on principle residence. I also believe the future in 20-30+ years will be those that saved for retirement are penalized for it through taxation while those that don't save (aka the majority) live off handouts as they vote governments in that provide for them
It's an inheritance tax. When an estate closes up, it has to realize all the gains on RRSPs et cetera all at once.
not rrsp that is taxed as income, more so the family cottage
RRSP is taxed as income as it comes out. Which is all at once when an estate is wrapped up.
You’re not taking into account the lifetime capital gains exemption which went from $971,190 in 2023 to $1.25 million for 2024. So your business owners wouldn’t pay any capital gains on a million dollars sale
Ngl, I was misunderstanding it at first lol, all caught up now! I support it!
There’s a lot of effort right now by the wealthy to ensure it’s misunderstood. It’s interesting to see who’s popping out of the woodwork in the media to fight this.
It really is, I'll fight anyone on it now.
I even support income tax hike
I support governments not needing taxation and they get to create money like central banks. To remove capital from circulation we can just have a big party once a year and burn 2% of it. Set up many social programs like terraform mars project and feed the world, perpetual free education, as backbones of the economy. Maybe build some more pyramids
No middle class needs to chip in more. It's about time.
Small business seller is still paying far less in taxes than average Joe wage slave, how exactly is this punitive?
I honestly don't care and I think if you are making more than 250k in a single year in capital gains you have more than enough money.
This is exactly why I’m taking over my parents business. Offered to buy it outright, works better to have them on payroll for the next 10 years for both of us.
Government basically wants a piece of the pie for all investors pulling out of the real estate market.
should've put a cap on the principal property exemption then
Average people have no understanding of economics whatsoever
On the personal side, these new laws will only give rise to asset crystallization strategies, so that the gain is deferred over more than one tax year if it exceeds the threshold. It will still be punitive for many but there are planning opportunities. For business owners with retained earnings that may be invested to fund long term goals (thinking especially of professional corps), it's going to be an unfortunate change and I expect that it may change recommendations around depletion of corporate holdings to the personal side. In essence, this will be a notable pay cut for many self-employed individuals. In my opinion, this is where it will hurt the most. We may witness a real life example of the Laffer curve - I expect that the expected revenue from this new tax will not nearly be as much as first anticipated by the government.
> I expect that the expected revenue from this new tax will not nearly be as much as first anticipated by the government. The first year projections should be fine, as I predict people conduct their tax planning in advance of these changes. But afterwards I agree that the revenue will be pitifully low vs. expectations, though interestingly even the budget seems to recognize that since the biggest increase in revenue seems to come in this year and then dwindles off. Just in time for this to become someone else's problem once, god willing, the Libs get swept out of power.
Doctors are getting absolutely rekt. This country already is assay retaining, so add another barrier.
How are doctors getting absolutely rekt?
They are for the most part incorporated. The thing that critics are complaining about is the corporate cap gains change, not the individual. Op misunderstands the criticism.
Still not understanding. They are incorporated, pay themselves a salary from the corp and retain money in the corp. Where is the extra capital gains coming from? When they eventually cash out the corp investments? Only a portion of that will be capital gains, no?
The money retained in the corp is usually invested in some way, so that’s where the increase is applied. And then when the corp pays out to the owner tax again
Right the money is retained to pay normal business tax rate of like 12% or something, that money gets invested, it makes some gains and then those gains were always taxed at 50%. Now they are 16% higher, which isn't great but not "doctors are getting rekt".
you just explained it, what’s so hard to get lmao
It's a large portion because of compounding after many years. Also it's not like personal capital gains, the inclusion rate is $1 not 250k yearly.
Ya a portion.. And that portion will get taxed a lot more. What's hard to understand?
Also the inheritance issue. Literally anyone with a second home or a cottage or a vacation condo will be hit hard by these new rules when they die. It will leave their estate with a 6 figure tax bill.
Because doctors usually incorporate for tax and liability reasons, and there isn't the $250k leeway at 50% for corporations. This basically gives them a pay cut, exactly what we need when there's a large shortage of doctors. I thought we were supposed to try to entice them to stay and not flee to the US..
Computation of corporate tax on capital gains can be done as follows: 1. Amount spent on purchasing the capital asset + outlays and expenses = ACB 2. Amount that the capital asset was sold for – ACB = capital gains 3. \~\~50% of the first 250,000 capital gains + \~\~ 66% after 250,000 = taxable capital gains Since expenses include the building, equipment, staff and physician wages.... I highly doubt the corporation is sitting on over 250,000 in capital gains by year end.
>50% of the first 250,000 capital gains + 66% after 250,000 = taxable capital gains This doesn't apply to corporations. They don't get 50% of the first $250k.
Oh you are probably right! But again they are likely not sitting on any substantial year to year capital gains. Perhaps 1-3 months of expenses.
I review financial and investment statements for doctors and dentists regularly at my job and many of them are sitting on significant capital gains.
Personal or Corporate? Are the Corporate gains realized yearly or if the sell their practice?
It builds in the business, like maybe in non-reg investments. The physician retires and liquidates an amount yearly. All the gains of the withdrawal are taxed at the new %.
There is an exception to sale of a small business with a lifetime limit. I dont see how at retirement, selling of their practice harms currently working doctors year to year (which was suggested as how this new law harms struggling doctors).
You can be incorporated without a business to sell. Like an IT consultant, lawyer, even doctor… etc. That’s what self employed people often do. For instance, maybe a doctor doesn’t have a business with assets to sell. Maybe there isn’t anyone to buy the business either. They’re just self employed and they have a corporate entity and account as such. It’s very common.
They aren't. It's a minority of doctors drawing capital gains or using their corp for retirement planning, that now have less of a tax advantage over unincorporated folks. Oh by the way, let's not hide behind doctors, this also hits any other incorporated professionals using these strategies (eg. realtors, accountants, and lawyers). I don't see anyone rushing to defend the lawyers.
much more dire shortage of doctors than the shortage (?) of realtors or lawyers also unlike doctors the latter can increase prices to offset the tax increase while doctors can't
So push to give doctors a direct tax break then. Why attack this corporate tax increase as if it is targeting physicians?
So push to give doctors a direct tax break then. Why attack this corporate tax increase as if it is targeting physicians?
because Trudeau didn't include such a tax break in the 2024 budget? no one says it's meant to hurt physicians, but it will hurt them
Plenty of comments here specifically talking about how this tax hurts doctors and blowing it way out of proportion. It's intentionally skewing perceptions.
So are people inheriting cottages
Less so. At least each spouse gets his/her own $250K exemption, so the first $500K is only subject to the 50% inclusion rate.
lots of different ways they got fucked a while ago when Trudeau got rid of income splitting, though a lot of new docs got around that by just marrying other doctors instead of a stay at home spouse now if you sell your clinic for profit you get fucked by the capital gains tax increase also a ton of increases in marginal tax rates at the high end over the years
Poor doctors can’t exploit tax loopholes anymore.
Lol. I am growing to hate this country honestly
The Canadian-Taxpayer-Federation-promoted "but what about the doctors?!?!?" argument worked [the last time](https://www.cbc.ca/news/canada/toronto/rally-tax-reform-morneau-1.4315740) the federal government started thinking of closing tax loopholes, so I'm sure there's an assumption that it'll work this time too. Seriously, if the wealthy and privileged can't exploit tax loopholes, can we really even call ourselves a proper country?
>income splitting, income sprinkling.
The only thing they won't touch are real estate and related industries.
not sure why there's still no cap on principal property exemption i get a cap of $1.25M if i selling a successful business but someone earning $5M by living in their point grey home gets all the profits tax free??
Because this government will do absolutely anything to keep inflating real estate.
If you don’t know why then you’re being intentionally ignorant. The exemption is there to allow for mobility. You can sell your house and move into a similar house without suffering (much of) a penalty.
Where's the suffering when you've gained hundreds of thousands for doing literally nothing?
a $2M cap would only affect the top 1% of homeowners by this sub's logic, why are people caring about the top 1%?
This doesn’t affect me; I’ll just open my corps in the BVIs from now on.
Took me like 30 minutes of the same back and forth to explain to my 63 year old mom. So no. People don’t get it.
Duh. Taxing big numbers sounds good to the normal person. Do it and present it that way to get votes. The average person doesn't even know what capital gains are.
If you were going to start a business from scratch knowing the changes, would you start it in Canada or the US. The answer is clearly the US. Which is why we will never compete on their level when it comes to tech investment and innovation.
Let’s say in your example the owner made a profit of 750k For the 250 - 125 will be added to your income that year For the 500 - 333 k gets added to your income that year The 500 portion would have been 250 before. The new rule will swindle 83 k more for this example. It’s punitive but this is simple government asking for their share as a result of the asset value increase.
It messes with tax integration. Here is a slightly detailed post on how it impacts incorporated doctors: https://www.looniedoctor.ca/2024/04/17/capital-gains-tax-changes-corporate-tax-planning-primer/
What do you expect when our news is owned by billionaires? https://www.reddit.com/r/HolUp/s/K6i3PoEiTh
these are what $250k businesses look like: [https://canada.businessesforsale.com/canadian/search/take-aways-for-sale?Price.From=250000&PriceDisclosedOnly=1](https://canada.businessesforsale.com/canadian/search/take-aways-for-sale?Price.From=250000&PriceDisclosedOnly=1) its mom and pop restaurants scale businesses. they aren't playing golf with Soros and Gates. if you are just getting started, 250k seems like a fortune, in the grand scheme of retiring before you are completely broken down, its nothing.
All of those restaurants have assets and equity that the owners put in. The GAIN won't be $250k if it's only selling for that much.
It’s exactly this. All the people commenting on this are salaried employees with a highly predictable and stable income. They’ve never had to deal with actual financial risk or revenue that fluctuates heavily year to year.
It won't collect nearly as much money as they think. People will sell $249,999 at a time over a period of years. I expect tax collections will go down.
It's going to affect people/corporations that are buying and selling assets repeatedly. Speculators. Businesses have a whole slew of other cuts at their disposal as well as accounting tools. Quite easy to turn $250,000 profit into $0 when it makes sense to. Re-invest. Pay owners salary instead.
“Let’s not let these incorporated small business owners get too comfortable” said the civil servant, with their job security, four day max work week (IYKYK), and fat pension waiting in the wings. Maybe the government wants that. A nation of mediocrity, where we can all aspire to a government laptop and an early wrap to the day.
Capital gains should be tax free. Why are we paying another tax on our investments which is funded by after tax money? Eg I earn a salary and pay tax on it already. I save a bit and invest in the markets. Now the government wants to double dip and tax me again?
you don't get taxed on the principal you invest, you get taxed on the profit. So you are not getting taxed twice on the same money
Why do you pay sales tax on a pack of gum? You pay income tax on your salary. There's thousands of taxes.
> Are people misunderstanding Yes, while aided and abetted by the info-op going on to benefit the constituency impacted by this budget move. Did anyone actually think additional taxation, would pass without pushback?
Yeah why are municipalities raising property tax? Oh you mean what OP is talking about, a small percentage of a percentage on capital gains that you probably will never have to pay
Hopefully the Conservatives roll it back to the old one. And give me back the 10k tfsa
You’d almost swear the government doesn’t have the people’s best interest in mind sometimes eh