Carney cancels planned hike to capital gains tax

Prime Minister Mark Carney has made a significant announcement regarding the proposed hike to the amount of capital gains that are subject to tax. The Liberal government has decided to cancel the increase, citing benefits for small businesses and private investment that will ultimately lead to job creation.

Carney emphasized the importance of this decision, stating that by cancelling the hike in capital gains tax, it will stimulate investment in communities and incentivize builders, innovators, and entrepreneurs to expand their businesses within Canada. This move is expected to have a positive impact on the economy and encourage growth across various sectors.

Furthermore, the government also revealed that it will maintain the increase in the lifetime capital gains exemption limit to $1.25 million for the sale of small business shares, farming, and fishing property. Legislation will be introduced to formalize these changes to the exemption limit in the near future.

The decision to cancel the increase comes after former Prime Minister Justin Trudeau deferred it until New Year’s Day 2026. The initial proposal to increase the share of taxable capital gains was outlined in the 2024 federal budget, sparking discussions and debates among various groups and individuals.

A capital gain is defined as the difference between the cost of an asset and its sale price, such as an investment property, stock, or mutual fund. Currently, only half of capital gains are taxable, with the remaining amount added to an individual’s income and taxed at their marginal income tax rate.

If the proposed changes had gone through, individuals with annual capital gains exceeding $250,000 would have seen two-thirds of those gains taxed. Additionally, two-thirds of all capital gains earned by corporations and trusts would have also been subject to taxation.

Opposition to the capital gains changes came from various quarters, including doctors, businesses, and the Conservative party. Concerns were raised about the potential negative impact on health care, home-building, small businesses, farmers, and retirement savings.

Doctors expressed worries that the changes could hinder efforts to recruit and retain physicians, especially considering the existing doctor shortage in Canada. The Canadian Medical Association highlighted the potential challenges doctors may face, particularly those who invest through their corporations for retirement.

In addition, a coalition of Canadian agricultural associations voiced their opposition to the capital gains tax change, urging the government to reconsider. The Canadian Federation of Independent Business also reported that a majority of its members opposed the change, citing potential harm to investment.

Overall, the decision to cancel the proposed hike in capital gains tax marks a significant development in Canada’s economic landscape. It is expected to support small businesses, encourage private investment, and foster job creation in the country.