An employee works on a modular home component at NRB Modular Solutions in Calgary on April 5, 2024.Jeff McIntosh/The Canadian Press
The Trudeau government had already announced a slew of affordability initiatives ahead of the release of its 2024 federal budget, but there were also a number of pocketbook measures in the spending plan that Ottawa had mostly kept mum about.
Arguably the biggest surprise was a proposed increase in the capital gain inclusion rate, a change the government says will boost revenues by raising taxes on the wealthy but experts warn could also hit some middle-class taxpayers.
Ottawa also provided a target start date for the much-anticipated Canada Disability Benefit for low-income, working-age Canadians.
Aside from the well-telegraphed array of new housing policies, the budget outlined a smattering of small tax benefits and consumer protection measures, from tweaks to the alternative minimum tax to changes to registered education savings plans (RESPs).
Here are some of the highlights on the key measures that affect Canadians’ bottom lines.
Raising taxes on capital gains
The budget proposes to increase the capital gains inclusion rate for individuals from half to two-thirds for annual profits above $250,000, effective June 25.
A capital gain occurs when someone sells an asset – such as a property or a stock – for a higher price than what they originally paid for it. Currently, only 50 per cent of that profit is included in tax calculations. Half of the capital gain is added to a taxpayer’s annual taxable income and taxed at their marginal tax rate. With the new inclusion rate, two-thirds – or 66.7 per cent – of an individual’s annual capital gain above $250,000 would be taxable.
The government said the measure will boost revenues by raising taxes on a small minority of Canadians with very high incomes. But the higher inclusion rate described in the budget would also hit middle-class Canadians who experience a one-off financial windfall from certain types of asset sales, said John Oakey, vice-president of taxation at Chartered Professional Accountants of Canada.
While the sale of a primary residence is exempt from the capital gains tax, Canadians selling a vacation home or rental property would be subject to the higher inclusion rate for net capital gains above the $250,000 threshold, Mr. Oakey said. The same holds for profit realized on investments held in non-tax-advantaged accounts.
The higher inclusion rate would apply to all capital gains realized by a corporation or trust.
A federal disability benefit
The budget also pledges to start funding the new Canada Disability Benefit. Payments of the federal benefit, which is meant to top up existing financial support for low-income working-age Canadians with disabilities, would starting in July 2025, the government said.
It will provide $2,400 a year to Canadians between the ages of 18 and 64. But eligibility for the benefit will be tied to the Disability Tax Credit, which has been widely criticized for being difficult to access for many Canadians with disabilities.
It’s also unclear whether the provinces and territories will heed Ottawa’s calls not to claw back assistance for those who’ll receive the new federal benefit.
Housing affordability
Among the widely publicized measures is the introduction of 30-year amortization periods on mortgages for first-time homebuyers who have a down payment of less than 20 per cent and want to purchase a newly built home.
Ottawa is also proposing to increase the amount first-time buyers can withdraw from an RRSP through the Home Buyers’ Plan from $35,000 to $60,000 and temporarily extend the grace period homeowners enjoy before they have to start putting money back into their retirement savings accounts.
RESPs
The budget also proposes automatically opening an RESP for eligible children born in 2024 and later years starting in fiscal year 2029. This will ensure an additional 130,000 children will receive up to $2,000 through the Canada Learning Bond, which helps low-income families save for postsecondary education.
While the aid isn’t tied to contributions, families must have an account open to receive the funding.
Tweaks to the alternative minimum tax
The budget includes a new round of proposed tweaks to the alternative minimum tax, which is meant to ensure that wealthy tax filers are subject to a certain minimum tax rate, no matter how many credits and deductions they can claim.
The Trudeau government’s efforts to tighten the AMT had stoked concerns that the new rules would discourage charitable donations from high net-worth donors. Under the new rules, individuals would be allowed to claim 80 per cent (instead of the previously proposed 50 per cent) of the Charitable Donation Tax Credit when calculating the AMT, among other changes.
Switching internet and phone plans
Ottawa is proposing to bar carriers from charging extra fees when consumers switch their internet or phone plans to a competitor.
Capping non-sufficient funds fees
The government also wants to apply a cap of $10 to non-sufficient funds fees, which are charged when an account holder doesn’t have enough money to cover a cheque or pre-authorized debit transaction.
