Investing in Canada Just Got More Expensive

30 May 2024 · 3 min

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3:04

A short YouTube commentary (May 30, 2024) by Donna Genie explaining a proposed change to Canadian capital gains taxation: raising the taxable portion of capital gains from 50% to 67% effective June 2024 for gains above CAD 250,000. The host gives a $500,000 gain example (taxed at 67% → $333,000 tax), contrasts this with lower U.S. rates (mentions ~20% current treatment) and notes a related U.S. proposal from President Biden to raise capital gains starting in 2025. The video warns this could deter investment and cause migration of investor capital.

Questions this video answers

May 30, 2024

Increase taxable portion of capital gains from 50% to 67%

June 2024

More than $250,000 (CAD implied)

Tax = $333,000

Chapters

Our neighbors to the north are making big changes in their capital gains rules. Watch out to see what Canada is up to on their capital gains. Will these changes roll downhill to the U.S. i'm Donna Bordeaux. We're keeping an eye on legislation here in the US where President Biden is looking to increase the capital gains rate beginning in 2025. But our neighbors to the north in Canada have already got a proposal in place for this. Effective In June of 2024, they want to increase their capital gains rate from 50% to 67%. Ouch. They want to take the capital gains rate for anybody who has more than $250,000 in gains and tax it hard. So imagine that you have a piece of property that you've had in your family for a long while and you sell it for $500,000 and it really didn't have in it and your profit was all $500,000 and you were in Canada. Let's do a little math. What's the tax on $500,000 if the tax rate is 67%? So of that $500,000 in profit you would end up paying $333,000 in income taxes. Is it even worth it to invest in Canada if those are the tax rates? I don't know. Makes our tax rates pretty, pretty good at currently 20% rather than 67%. Now in Canada, as I understand, they don't pay any taxes if you sell your home at a gain as long as you live there the whole time. But if you have a home and then you try to rent it, yeah, it's subject to capital gains. So I don't profess to know Canadian tax law really well. Just following the basics here and keeping up with what's going on in their system. I am hoping that these types of changes don't roll downhill to the US it will put a staggering stop to a lot of investment and take a lot of money out of the investors hands. So they won't be able to buy things. If that is going to be the case in Canada with a 67% rate, I'm not really sure that their real estate market can really handle that. Again, that gets into all the economics and politics of it. But people buying real estate or investing in businesses in Canada can't believe two thirds of the profit to the government. That's just not sustainable and most investors won't take that risk. Perhaps they'll invest in the US instead. Keep your eye on this one. I think it's a very interesting trend and pretty staggering percentage of capital gain in Canada, so watch out. And we'll keep you informed on the latest and greatest that we hear, as well as keeping you posted on what happens here in the United States. Sam.