An Update on the Proposed Capital Gains Tax Changes

Bridgeport’s John Fisher, President & Chief Investment Officer, and Mark Yestrau, Senior VP, Client Portfolio Manager, give an update on the proposed capital gains tax changes that were recently postponed until 2026 by the Liberal Government. 

Effectively, there is no change for both the 2024 and 2025 tax years as it relates to the taxation of capital gains. It is also unlikely that the proposed changes will ever be enacted given the likelihood of an upcoming election and the stated position of the Conservatives and the leading candidates to replace Trudeau as Liberal party leader.  

Mark Yestrau here with John Fisher from Bridgeport Asset Management. We had previously sat down and recorded an excellent video on the capital gains tax and a discussion on how we were going to deal with it for the tax year 2024, the different tax implications on the switches and a bunch of great advice. And lo and behold, we found out last weekend that the government had postponed all the proposed changes to 2026! So let’s take a moment to just recap what it was and how it will impact, if at all, our clients and viewers in 2026. 

Usually, tax is not this exciting. If everyone recalls, the Liberal Federal Government put into place rules last June 2024, which effectively said capital gains earned prior to the June 26th, 2024 date would be 50% taxed as they were in the past, and all gains earned after that date would be two thirds tax. 

With the change that just came out last week, they have now scuttled that, and they’ve pushed these new rules forward from June 2024 to January 1st, 2026. So there is no change for the 2024 and 2025 tax years as it relates to the taxation of capital gains. They will still be taxed at 50% of the gain at your marginal tax rate. 

I think everyone in the tax community and everyone in the investment community was questioning why the government was not going to suspend those rules, at least for a period, with the reason being they’d never been approved by Parliament, so they weren’t, in effect, law yet. But it was the Canadian Revenue Agency’s (CRA) policy to implement them as if they were law and as if they would be enacted by Parliament. The issue was, of course, they were unlikely to be ever enacted by Parliament, because Parliament has been suspended, it is prorogued, and we’re likely heading into a federal election with the Conservatives saying that if they win that election, they will not vote to implement the policies. And every major leading Liberal Party candidate that will be replacing Trudeau has also said they won’t do it. 

We were in this awkward limbo situation of potentially paying additional tax on gains that we would just get refunds for later. So that’s a very long-winded way of saying everything’s going to be a lot simpler in 2024 and 2025. We can all breathe a sigh of relief, and capital gains will continue to be taxed the way they’ve always been taxed, with the likely proviso that even in 2026, those rules will never come into effect and will end up in the garbage bin of history. 

For the sake of all accountants and investment managers out there, we certainly hope that this video withstands the test of time, doesn’t hit the dustbin, and that we don’t have to deal with this potential increase at any point in the near future.