January and February 2025 Updates to Tax Law
Recent updates to tax law were announced in early 2025 by the Department of Finance: capital gains inclusion rate change has been moved to 2026, and the deadline for making charitable donations in 2024 is now February 28 2025.
Capital Gains Inclusion Rate
The Department of Finance has announced that the effective date for changes to the capital gains inclusion rate will now be January 1, 2026, instead of June 25, 2024.
As a result, the Canada Revenue Agency (CRA) has reverted to the currently enacted capital gains inclusion rate of one-half. This means that all capital gains realized before January 1, 2026, will be subject to this current tax rate, unless an exemption applies.
Key Details:
- The current capital gains inclusion rate is one-half (this translates to tax of approximately 25% on corporate capital gains and a top rate of 24% on personal capital gains in Alberta)
- After January 1, 2026, if the current proposed legislation passes, the inclusion rate will be two-thirds on capital gains:
- That are In excess of $250,000 per year for individuals
- On all capital gains realized by corporations and most types of trusts
- The CRA will coordinate corrective reassessments to reverse the application of the two-thirds inclusion rate for corporations that applied the elevated rate to their filings.
As the capital gains rate change is now proposed to be effective January 1, 2026, corporations can continue to use existing forms and tax software to file using the one-half inclusion rate until further notice.
Charitable Donations deadline extended
The Department of Finance has announced that the deadline for charitable donations eligible for the 2024 tax year will be extended to February 28, 2025 (in alignment with the RRSP deadline). As always, the donation can also be claimed in 2025 or carried forward and claimed in any of the next five tax years.
Key Details:
- Corporations and graduated rate estates with tax years ending after November 14, 2024, but before 2025, are eligible, as are all individuals
- The donation must be in the form of cash or transferred by way of cheque, credit card, money order or electronic payment
- Charities will likely wish to make sure that they issue donation receipts for January and February 2025 donations promptly to assist their donors
Should you have questions or need assistance with capital gains, charitable donation deadlines or any other taxation issue, feel free to reach out to the Tax team at McLennan Ross.