Changes to the capital gains inclusion rate take effect today — and while some real estate experts say the changes are causing anxiety within the industry, a leading real estate association says it hasn’t seen a bump in sales of secondary residences.
As of today, the inclusion rate — the taxable percentage — goes from 50 to 66 per cent on capital gains above $250,000 per year for individuals, and on all capital gains realized by corporations and trusts.
When you sell an asset for a higher price than its original value, the profit is called a capital gain. It could be a cottage, an investment property, a stock or a mutual fund. In Canada, the capital gains tax is not applied to sales of primary residences.
People who own these assets had more than two months after the change was announced to sell their assets before it took effect. But the Canadian Real Estate Association (CREA) says there has not been a significant bump in housing sales.
“We haven’t noticed anything notable on the sales side at this time,” said CREA spokesperson Pierre Leduc.
He said the association did notice a bump in multi-family property listings after the budget was tabled but added “we suspect a number of them will be taken off the market after (Monday).”
Mark Pedlar, a realtor who works in the resort town of Grand Bend, Ont., said his clients are worried about the change but other market issues are affecting sales.
“There was an increase in listing this year but the capital gains increase was less of a factor, I think, for people selling than it may be hyped up to be,” he said.
“The interest rates, mortgage renewals, short term rental regulations and market trends have been more of a factor for the increased inventory.”
Pedlar said cottage owners who want to pass their property down to younger family members are the ones most affected by the change.
“It’s hard to part with a family cottage, so they will pay the tax down the road when it’s time to sell,” he said.
WATCH: Politicians make conflicting claims about capital gains
Who’s telling the truth about the capital gains tax? | About That
11 days ago
Duration 15:07
Canada’s capital gains tax increase comes into effect on June 25. Andrew Chang breaks down some misleading claims about the changes coming from both sides of the political aisle and explains who is likely to pay the new tax, how much and how often. Does it really just hit the ultra-rich?
CBC News spoke with two other realtors who reported fielding many questions about the changes to the capital gains inclusion rate. They said a number of other factors, including interest rates and Ontario’s foreign buyers tax, have slowed sales on cottages and investment properties — but the capital gains changes are making some property owners anxious.
“We definitely had a flood of calls from consumers, but as soon as people started to understand how much time and effort it would’ve taken to get their property for sale, sold and closed by the deadline, the math didn’t make sense for most people,” said Re/Max Canada president Christopher Alexander.
Tax changes a matter of fairness: finance minister
Finance Minister Chrystia Freeland has said that only the richest will feel the effects of the change — she estimates only 0.13 per cent of Canadians will end up paying more. She also said the changes will raise $19 billion for the federal government — money for social programs and housing programs aimed at the middle class.
“The fair way to finance them is with tax fairness. That’s what we’re doing,” she said.
Some economists, including the University of Calgary’s Jack Mintz, say the federal government is underestimating how many people will be affected by the change to the inclusion rate.
He said his analysis projects that closer to 1.25 million Canadians will end up being affected, not the 40,000 people the government has estimated.
The changes to the inclusion rate created a “rush to close transactions” on corporate deals, said lawyer Audrey DeMarsico. She added most of those deals were already in the works when the capital gains changes were announced.
“Anything that was already a proposed deal and negotiation that was ongoing, there is that impetus to close before the changes occur on the 25th,” said DeMarsico, a business law, estates and intellectual property lawyer at Nelligan O’Brien Payne LLP in Ottawa.
She said the changes affect a wide range of businesses, including real estate investment operations, advertising agencies and any business that was considering an ownership change.
“Anyone who’s been in talks for that kind of change had a sudden deadline imposed on budget day,” she said.
Several economists and industry leaders told CBC News they’d heard anecdotes about a spike in corporate restructuring activities before the changes went through, but there’s no data to confirm it.
Benjamin Bergen, president of the Council of Canadian Innovators, said he received 1,800 inquiries about the changes when they were announced. He said he’s heard anecdotes about some businesses moving to other countries to avoid the increase.
“People are not exiting in a ruckus. They’re quietly just doing it,” he said.
Lingering concerns about growth
Multiple industry groups, including those representing farmers and the tech sector, have claimed that changes to the inclusion rate will discourage investment. Conservative Leader Pierre Poilievre came out against the change, calling it “job-killing.”
In a statement, Office of the Leader of the Official Opposition spokesperson Sam Lilly accused the federal government of “hiking taxes on small business while Canadians’ paycheques are shrinking.”
Bergen is calling on the federal government to reverse course, warning that it will push capital and investment to the United States.
As well, a recent International Monetary Fund report on Canada says “the increase in the capital gains inclusion rate improves the tax system’s neutrality with respect to different forms of capital income and is likely to have no significant impact on investment or productivity growth.”
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
