FEDERAL
BUDGET

Budget 2024 proposes to increase the capital gains inclusion rate from one half to two thirds for corporations and trusts, and from one half to two thirds on the portion of capital gains realized in the year that exceed $250,000 for individuals, for capital gains realized on or after June 25, 2024.

The income tax system provides an individual with a lifetime tax exemption for capital gains realized on the disposition of qualified small business corporation shares and qualified farm or fishing property. Budget 2024 proposes to increase the LCGE to apply to up to $1.25 million of eligible capital gains. This measure would apply to dispositions that occur on or after June 25, 2024.

The Budget proposes introducing an incentive to reduce the tax rate on capital gains on an eligible individual’s disposition of qualifying shares. This incentive would provide for a capital gains inclusion rate of 50% of the prevailing inclusion rate. The lifetime limit would be phased in by increments of $200,000 per year, beginning on January 1, 2025, until it reaches $2 million by January 1, 2034. Under the 66.67% capital gains inclusion rate proposed in this Budget, this measure would result in an inclusion rate of 33.33% for qualifying dispositions. This measure would apply in addition to any available LCGE.

The Budget proposes to increase the withdrawal limit from $35,000 to $60,000 for 2024 and subsequent years for withdrawals made after April 16, 2024.

The Budget proposes to expand the list of expenses eligible for the Disability Supports Deduction. Further, the Budget proposes that service animal expenses be recognized under the Disability Supports Deduction. Taxpayers would be able to choose to claim an expense under either the Medical Expense Tax Credit or the Disability Supports Deduction. These measures would apply to the 2024 and subsequent taxation years.

The Budget proposes to provide an accelerated CCA of 10% from 4% for new eligible purpose-built rental projects that start construction on or after April 16, 2024, and before January 1, 2031, and are available for use before January 1, 2036. The Budget proposes to provide immediate expensing for new property additions in Class 44 (patents), Class 46 (data network infrastructure), and Class 50 (general purpose computers) acquired on or after April 16, 2024, and before January 1, 2027. The enhanced allowance would provide a 100% first-year deduction and be available only for the year the property becomes available for use. Interest Deductibility Limits – Purpose-Built Rental Housing The Budget proposes an elective exemption from the excess interest and financing expenses limitation (EIFEL) rules for certain interest and financing expenses incurred before January 1, 2036, in respect of arm’s length financing used to build or acquire eligible purpose-built rental housing in Canada.