A short YouTube commentary by Donna Genie (May 23, 2024) summarizing a proposed Canadian change to capital gains taxation. The speaker reports that, effective June 2024, Canada would raise the taxable portion of capital gains from 50% to 67% for gains above $250,000, illustrates the effect with a $500,000 gain example (claiming $333,000 tax), and contrasts that with current U.S. capital gains rates while warning of potential negative effects on investment and real estate in Canada.
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.
