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Sheryne Mecklai

Tax Partner at Manning Elliott Vancouver
April 18, 2024

Key Highlights from Federal Budget 2024: What You Need to Know

Federal budget 2024 was announced April 16, 2024, unveiling several key changes that will impact individuals, businesses, and the economy.

Here are some of the Federal Budget 2024 highlights:

1. Capital Gains Inclusion Rate Adjustment

Starting June 25, 2024, the inclusion rate for capital gains will increase from 50% to 2/3.

Individuals (excluding trusts) will maintain the 50% inclusion rate for the first $250,000 of capital gains yearly or for the period from June 25 to December 31, 2024. Corporations, trusts, and other entities will use the 2/3 inclusion rate for all gains.

Similarly, capital gains rules will apply to stock option benefits and capital losses carried forward or backward.

2. Lifetime Capital Gains Exemption

Effective June 25, 2024, the lifetime capital gains exemption limit will increase to $1,250,000 from the current $1,016,836 (adjustments for inflation starting in 2026).

3. Employee Ownership Trust Tax Exemption

An exemption is proposed for up to $10M of the capital gains realized on a sale of a business to an Employee Ownership Trust. There are significant requirements to qualify for the Employee Ownership Trust Tax exemption.

4. Canadian Entrepreneurs’ Incentive

Beginning in 2025, certain shares will qualify for a reduced capital gains inclusion rate of one half the prevailing inclusion rate, which is effectively 33% of the actual capital gain. Eligibility criteria for the Canadian Entrepreneur’ Incentive will be stricter than those for the lifetime capital gains exemption.

5. Canada Disability Benefit

Starting in July 2025, eligible Canadians aged 18 to 64 who qualify for the Canada disability tax credit will receive up to $2,400 per year, pending regulatory approval and consultations with persons with disabilities.

6. Home Buyers’ Plan (“HBP”)

Starting April 17, 2024, the HBP withdrawal limit will be increased from $35,000 to $60,000 for 2024. The grace period, before RRSP repayments are required, will temporarily be extended to five years (previously two years) for individuals who have made withdrawals from the HBP between January 1, 2022 and December 31, 2025.

7. Alternative Minimum Tax (“AMT”) Adjustments

Amendments to the AMT regime proposed in Budget 2023 will be implemented with adjustments  including increasing the available donation tax credit to 80% (from 50%).

No broad-based adjustments were made to address concerns about smaller trusts being subject to AMT and the proposal to limit the deduction of interest and financing costs for AMT purposes remains unchanged.

See Manning Elliott’s previously released blog,  Changes to Alternative Minimum Tax Rules.

8. Accelerated Capital Cost Allowance

New eligible purpose-built rental projects commencing construction between April 16, 2024 and January 1, 2031 will qualify for an Accelerated Capital Cost Allowance (CCA) rate of 10% (currently 4%).

Immediate 100% CCA expensing will also apply to new additions of property in certain classes acquired after April 16, 2024, and available for use before January 1, 2027. These classes include patents, data network infrastructure equipment, and general-purpose electronic data-processing equipment.

9. Interest Deductibility for Purpose-Built Rental Housing

Interest and financing expenses incurred before 2036 for arm’s length debt used to build or acquire eligible purpose built rental housing in Canada will be exempted from the proposed excessive interest and financing expense limitation (EIFEL) rules for taxation years beginning after September 30, 2023.

10. Consultation on Taxing Vacant Land

To unlock unused vacant land and to incentivize the construction of new housing, the federal government will launch consultations later in the year on a potential new tax on residentially zoned vacant land.

11. Previously Announced Tax Measures

Federal Budget 2024 will proceed with previously announced tax measures, including proposals relating to:

  • Underused Housing Tax
  • Alternative Minimum Tax
  • Tax on Repurchases of Equity
  • Modernizing the General Anti-Avoidance Rule
  • Excessive Interest and Financing Expenses Limitations (EIFEL)
  • Substantive Canadian-controlled private corporations

Still Have Questions About the Federal Budget 2024 Announcement?

If you need clarification on any of the Federal Budget 2024 highlights mentioned above, please contact a Manning Elliott team member. You can view Government of Canada’s Federal Budget 2024 here

Manning Elliott regularly posts new blogs and up-to-date articles on taxation changes by the federal and provincial governments.

NOTE: Federal and provincial tax laws are complex and are subject to frequent changes. Information contained in this  Manning Elliott blog is not intended to represent legal or tax advice. Please consult with your tax adviser before employing any strategies based on the information discussed within this article.