Increased Capital gain inclusion rate
12-16-2021, 10:38 PM
#1
Rennlist Member
Thread Starter
Increased Capital gain inclusion rate
OT of course.
Nobody knows if (when) this may be enacted, and if to 75% or 100% inclusion. I can only surmise this is on the way at some point and will be an easy tax haul with minimal voter pushback.
Curious to hear how others are dealing with or advising clients on unrealized capital gains.
Cheers
Matt
Nobody knows if (when) this may be enacted, and if to 75% or 100% inclusion. I can only surmise this is on the way at some point and will be an easy tax haul with minimal voter pushback.
Curious to hear how others are dealing with or advising clients on unrealized capital gains.
Cheers
Matt
Last edited by Matt Lane; 12-16-2021 at 10:47 PM.
12-17-2021, 03:01 AM
#2
People who have been doing some tax-loss selling this month (to harvest the capital loss), can apply the loss against capital gains incurred earlier this year. However, you must be mindful of the superficial loss rule. (Can not re-buy the identical stock or other assets for 30 days.)
No such rule applies to re-buying an asset that will incur a capital gain, you are simply paying tax in advance. This might make sense if the inclusion rate goes up. However, all that income from selling most of your holding in one year will push you into a higher tax bracket, and all that tax you pay in advance will not be available to invest and compound for years and years to come. Make sure you do the math on this before acting.
No such rule applies to re-buying an asset that will incur a capital gain, you are simply paying tax in advance. This might make sense if the inclusion rate goes up. However, all that income from selling most of your holding in one year will push you into a higher tax bracket, and all that tax you pay in advance will not be available to invest and compound for years and years to come. Make sure you do the math on this before acting.
12-17-2021, 10:45 AM
#3
One would expect that there would be an announcement with a future enactment date so that people will have an incentive to trigger a lot of gains and the gov't will collect a one-time windfall of tax. However, given the way Trudeau's Liberals have acted in the past, we can't rely on them to act reasonably or prudently.
Some are taking advantage of surplus stripping while this more aggressive strategy is still possible - they've tried killing it unsuccessfully in the past and an increase in the TCG inclusion rate would effectively kill it.
Other than a potential one-time windfall, most tax changes bring in far less than the gov't estimates as those with the means adjust their strategies. The only way they're going to get meaningful increased tax revenue is through unpalatable changes, like increasing middle-class tax rates, taxing pensions, eliminating the principal residence exemption, etc.
As a reminder because it seems many people don't fully understand our personal tax bracket system - you only pay tax at a particular bracket's rate on the marginal dollar. For example (2021 Ontario info), the highest tax bracket kicks in at $220k and is 53.53% and the bracket right before is 51.97%. On your $220k'th dollar, you pay $0.5197 in tax and $0.5353 on the next dollar (and every dollar after that).
Some are taking advantage of surplus stripping while this more aggressive strategy is still possible - they've tried killing it unsuccessfully in the past and an increase in the TCG inclusion rate would effectively kill it.
Other than a potential one-time windfall, most tax changes bring in far less than the gov't estimates as those with the means adjust their strategies. The only way they're going to get meaningful increased tax revenue is through unpalatable changes, like increasing middle-class tax rates, taxing pensions, eliminating the principal residence exemption, etc.
As a reminder because it seems many people don't fully understand our personal tax bracket system - you only pay tax at a particular bracket's rate on the marginal dollar. For example (2021 Ontario info), the highest tax bracket kicks in at $220k and is 53.53% and the bracket right before is 51.97%. On your $220k'th dollar, you pay $0.5197 in tax and $0.5353 on the next dollar (and every dollar after that).
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Rallybill (12-20-2021)
12-17-2021, 12:04 PM
#4
Other than a potential one-time windfall, most tax changes bring in far less than the gov't estimates as those with the means adjust their strategies. The only way they're going to get meaningful increased tax revenue is through unpalatable changes, like increasing middle-class tax rates, taxing pensions, eliminating the principal residence exemption, etc.
As long as they don't f*ck with the div tax credit...
12-17-2021, 05:39 PM
#6
Burning Brakes
12-17-2021, 06:19 PM
#7
Trending Topics
12-17-2021, 06:25 PM
#8
Race Car
Rate at which American musicians are selling publishing rights seems to have accelerated. Bruce just raked in half a billion. Wonder if Biden warned them of impending doom? If it happens there, Fiberals will follow suit.
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Lemikson (12-20-2021)
12-17-2021, 07:56 PM
#9
Taxing groceries would ensure anyone who is privileged enough not to have to grow their own food pays their fair share.
12-17-2021, 10:16 PM
#10
Rennlist Member
Thread Starter
Guess we just will have to wait and see. Unlike the principal residence exemption (when a LOT of folks own homes as a major portion of net worth and retirement plan), there are billions of unrealized gains - primarily in the hands of the top few % wealth-level Canadians.
If the govt needs cash, and it most certainly will, that's a pretty small base of voters to disadvantage.
And remember when income trusts got slammed by Flaherty. If this happens, it will be one and done, I wouldn't expect a warning - hence my question.
So yeah, taxable income brackets, if they matter to your personal situation, are key to this. But that aside, guess it comes down to do you feel lucky, pay now or pay maybe 50% more later?
Cheers
Matt
If the govt needs cash, and it most certainly will, that's a pretty small base of voters to disadvantage.
And remember when income trusts got slammed by Flaherty. If this happens, it will be one and done, I wouldn't expect a warning - hence my question.
So yeah, taxable income brackets, if they matter to your personal situation, are key to this. But that aside, guess it comes down to do you feel lucky, pay now or pay maybe 50% more later?
Cheers
Matt
12-17-2021, 11:26 PM
#11
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Guess we just will have to wait and see. Unlike the principal residence exemption (when a LOT of folks own homes as a major portion of net worth and retirement plan), there are billions of unrealized gains - primarily in the hands of the top few % wealth-level Canadians.
12-18-2021, 08:22 AM
#12
Rennlist Member
pensions plans largely non taxable.
12-18-2021, 08:58 AM
#13
Three Wheelin'
1, 3 and 4: don't conflate income/profit taxes and consumption taxes.
2: fuel taxes in canada are the 2nd lowest in the G7
12-18-2021, 09:24 AM
#14
Canada is predominantly a nation of homeowners with
the majority of Canadians owning their home and only 32% of the population renting. The homeownership rate rose steadily since 1971, going from 60.3% to 68.4% in 2006 and culminating at a high of 69% in 2011.
Yeah right, no political risk whatsoever...
Last edited by .2PDK; 12-18-2021 at 09:26 AM.
12-18-2021, 09:30 AM
#15