Understanding the New Capital Gains Tax Proposal in Canada
With the Canadian housing crisis weighing heavily on young homebuyers, Premier Justin Trudeau has introduced a new Capital Gains Tax proposal. This tax would range between 50% to 67%, depending on the taxpayer’s income bracket. The Capital Gains Tax applies to individuals when they sell an asset or capital property, with the profits from these sales considered as capital gains.
Who Will Feel the Impact of the Revised Capital Gains Tax?
Starting June 25, the proposed changes will affect individuals with over $250,000 CAD in capital gains annually. Corporations and trusts will also face higher tax obligations on a larger portion of their gains. The adjustment is expected to mainly impact the top 0.13% of individuals, around 12% of Canada’s corporations, and Canadians with an average income of $1.42 million CAD.
- This amendment will not affect 99.87% of Canadians, excluding the sale of primary residences.
- The projected revenue from this measure over the next five years is estimated to be $19.3 billion.
Understanding Taxation on Cryptocurrency in Canada
Cryptocurrency in Canada is treated as either business income or capital gain and categorized as a commodity. Canadian taxpayers do not pay taxes on purchasing or holding crypto, but taxes are applicable on capital gains or business income from cryptocurrency transactions, mining activities, or other related transactions.
- Individuals holding crypto are taxed on 50% of their total capital gains, while professional traders are taxed on 100% of their profits.
How Stocks Are Taxed in Canada
When it comes to stocks in Canada, any taxable capital gains must be declared as income on the tax return for the year the stock was sold. Generally, the income is considered to be 50% of the capital gain. For example, selling an asset for $2,000 CAD with an adjusted cost base of $1,000 CAD would result in a taxable income of $500 CAD ($1,000 gain x 50%). This amount is added to taxable income and taxed at the applicable marginal tax rate based on the tax bracket.
- Under the new Capital Gains Tax law, if the amount exceeds $250,000 CAD, the annual tax percentage could range from 50% to 67%.
Final Thoughts on Taxation in Canada
It is essential to stay informed about changes in tax laws, especially those related to capital gains and investment assets like cryptocurrency and stocks. Understanding how these tax regulations affect you can help in making informed financial decisions and staying compliant with the tax authorities.
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