Starting June 25 2024, significant changes to capital gains tax are coming into effect. If you're involved in selling assets like investment properties or stocks, grasping these changes is essential to managing your finances in 2024. 

Understanding the New Capital Gains Tax Regulations:

Capital gains refer to the profit earned from the sale of an asset, such as real estate, stocks, or mutual funds. For instance, if you bought a property for $500,000 and sold it for $700,000, your capital gain would be $200,000.

Under the new rules, for any capital gains exceeding $250K, 66.6% of that gain will now be taxable, or it will be 66.6% for any capital gains made within your corporation. This means higher costs for any profits you made through your real estate investment !  The change aims to support government funding for new projects and programs by tapping into the profits from high-value asset sales.

Example of How This Affects You:

Let's say you purchased an investment property for $500,000, and its current market value is $1 million. If you sell the property, there is a capital gain of $500,000. Under the present 50% inclusion rate, only $250,000 of the profit would be taxable.

However, with the new rule, we'll divide the gain into two parts. For the first $250,000, the taxable amount will be 50%, resulting in $125,000. For the remaining $250,000, the inclusion rate will be 66.6(~67%) and so $167,500 would be taxable.

Therefore, under the new rule, the total taxable amount would be $292,500, which is $42,500 more than before.

Of course, if your capital gain is below the $250,000 threshold, the existing tax rate of 50% would still apply. For example, if you have a capital gain of $200,000, only $100,000 of your gain would be taxable.

Navigating the Change:

These adjustments could significantly affect your tax bill and investment strategy. Understanding these rules can help you plan better and potentially save on taxes.

Should you have any questions about the new capital gains tax change, please speak to your tax professional or contact us for our recommended tax professionals. Let's ensure your investments remain smart and tax-efficient in this changing landscape! 🌟