Canada Capital Gains Tax Increase Impact on Albertans' Vacation Properties

Capital gains tax increase in Canada causing frustration for Albertans with secondary homes, impacting wealthiest 0.13%, advice to consult tax specialist.

A recent increase in the capital gains tax, specifically targeting Canada's highest earners, has sparked frustration among some Albertans who own secondary homes or cottages, as reported by a real estate broker.

Effective June 25, the tax rate will rise from 50 per cent to 67 per cent for individuals earning over $250,000 in capital gains.

Jim Jardine, an associate broker at Trilliant Real Estate Group, expressed concerns about the impact of this tax hike on the real estate market. He specializes in selling recreational properties and has already been approached by numerous individuals weighing the decision to sell their secondary properties or retain ownership.

The government estimates that this change will affect only the wealthiest 0.13 per cent of Canadians, primarily those with an average income of $1.42 million and approximately 12 per cent of the country's corporations.

To illustrate the impact of the tax increase, consider the scenario of selling a vacation home. If the property was purchased for $250,000 and later sold for $750,000, the capital gain would be $500,000. Under the current tax regime, the taxable capital gain would be $250,000 at a 50 per cent rate. However, after June 25, 2024, the new tax structure would impose a 50 per cent tax on the first $250,000 of the gain and a 66.7 per cent tax on any amount exceeding $250,000. This would result in a taxable gain of $291,750.

As the prime selling season for recreational properties approaches in May, Jardine noted a lack of available properties on the market, attributing it to the uncertainty caused by the tax changes. Many property owners are grappling with the implications and seeking guidance on the best course of action.

Evelyn Jacks, president of the Knowledge Bureau and a prolific author on tax matters, advises individuals to seek advice from tax specialists before making any hasty decisions. She emphasizes the significance of understanding the financial implications and analyzing the numbers to make informed choices in light of the substantial tax increase.

In conclusion, the capital gains tax increase targeting high-income earners has raised concerns among property owners, particularly those with secondary homes or cottages. The impending changes have created uncertainty in the real estate market, prompting individuals to carefully evaluate their options and seek professional advice to navigate the evolving tax landscape.