Most of our clients, used by the Will and Estate Lawyers, or Wills and Probate Lawyers at Dale Streiman Law LLP are aware that capital gains as opposed to straight income is treated differently under The Income Tax Act. They are generally treated more favourably. Some capital gains are completely free of any tax such as on ones principal residence. So, if your home increases in value dramatically during the time that you live there, all of that gain is yours tax free to keep. One of the few times the government keeps its hands off of your money. When drafting Wills and Power of Attorney documents, these tax concepts need to be taken into account.
Estate Lawyers point out that as of the time of the publishing of this blog article, there are proposed changes to the inclusion rate of capital gains. By inclusion rate, we mean how much of the capital gain is to be treated as taxable income and most recently that has been at 50%, although the proposal is that it will increase in most circumstances to two thirds.
One can snort and complain about this tax grab by the government; however, this inclusion rate has changed over time:
Prior to 1972
None, capital gains were not taxed
1972
One half
1988
Two thirds
1993
Three quarters
2000
One half
2024
Two thirds in excess of $250,000 which is subject to an inclusion rate of one half
To be specific, it is only an individual and a graduated rate estate, “GRE” ( https://www.dalestreimanlaw.com/what-is-a-gre-a-graduated-rate-estate/ ) see our blog on what is a graduated rate estate (GRE) that are entitled to use the first $250,000 capital gain to be included at 50%. Capital gains in excess of $250,000 are taxed at the inclusion rate of two thirds. Companies and most trusts do not enjoy that $250,000 initial capital gains lower inclusion rate of 50%.
