Deferral in Implementation of Change to Capital Gains Inclusion Rate (Updated)

The federal government announced today (January 31, 2025) that it is deferring—from June 25, 2024, to January 1, 2026—the date on which the capital gains inclusion rate would increase from one-half to two-thirds on capital gains realized annually above $250,000 by individuals and on all capital gains realized by corporations and most types of trusts. 

The government also announced it is staying its course with the increase of the Lifetime Capital Gains Exemption (LCGE) to $1.25 million, effective June 25, 2024, and introduction of a new Canadian Entrepreneurs’ Incentive. The government will introduce legislation to support these measures in due course.

For the full details, read Government of Canada announces deferral in implementation of change to capital gains inclusion rate.

CRA has Reverted to Administering the Inclusion Rate of One-Half

The CRA has communicated that it has reverted to administering the currently enacted capital gains inclusion rate of one-half. This means that all capital gains realized before January 1, 2026, will be subject to the currently enacted inclusion rate of one-half, unless an exemption applies.

• Individuals and Trusts – With the proposed change to the effective date, the CRA will issue forms that have been reverted to the currently enacted rate in the coming weeks. The CRA will grant relief in respect of late-filing penalties and arrears interest until June 2, 2025, for impacted T1 Individual filers and until May 1, 2025, for impacted T3 Trust filers to provide additional time for taxpayers reporting capital dispositions to meet their tax filing obligations. The CRA is working as quickly as they can to adjust their systems and forms so that taxpayers who need to report capital dispositions can do so as early as possible.
• Corporations – Corporations can continue to use existing forms and tax software to file using the one-half inclusion rate until further notice. For the small number of corporations that followed CRA’s guidance to file on the basis of the NWMM tabled in Parliament on September 23, 2024, the CRA will coordinate corrective reassessments to reverse the application of the two-thirds inclusion rate.

As the government intends to maintain the existing coming into force date of the proposed increase to the LCGE, the CRA will continue to administer the proposed change, which applies to dispositions that occur on or after June 25, 2024. Indexation of the LCGE would resume in 2026.

See the CRA Newsroom item Update on the Canada Revenue Agency's administration of the proposed capital gains taxation changes

Implementation in TaxCycle

We are awaiting additional guidance from the CRA for software developers on existing draft or published forms. Once we clarify what changes are required to TaxCycle, we will communicate further information.