Canada's Controversial Capital Gains Tax Change 

Canadians really are Cool, United, Creative, Kind, Stable. Now read the first letters.

In Canada, for how long do you have to live at a property for it to be considered your principal residence?

Channels and individuals not explaining correctly probably exploit specific angles for engagement purposes...or political goals.

I don't think they understood it themselves, I once saw NBC reporters fail to understand the tax bracket system. My main problem wasn't the tax code change, it was the budget that accompanied it. Incredibly high spending on an indebted country

i wonder why media properties owned by investors living off capital rather than holding a job want to paint capital gains taxes as bad for the average non-millionaire 🤔

Cause they’re all owned by the right 😅

​@@nlz1I am also confused by this. Do you think they are only interested in their own selfish interests?

Somehow I get the feeling that those influencers who don't know the difference might not be clearing 250k in taxable capital gains per year anyway 😉

@@MillennialMoron safe bet

@@MillennialMoron Or they do know the difference, but they spread misinformation anyway in order to get outrage likes and follows.

Which leads me to the question: why do you even have inclusion rates? Wouldn't it be easier to simply have a different tax rate?

That's utter nonsense. You didn't understand it.

try not to tell them about m.a.i.d. :P

I think they only have until June 25

Hilarious

So disappointed every time I have to explain the basics of our taxes here to people. The light bulbs I see come on after explaining tax brackets alone is blinding!

Unfortunately, clear and detailed news doesn't increase viewership. Sensationalism has killed journalism

Most mainstream media have no incentive to be clear given the fact that they are owned by billionaires who have their own political agenda.

😅Being clear and detailed won't generate views, people want sensationalism and drama.

Which media outlet was not clear on this?

Thoughts and prayers 🙏

@@ThePlainBagel "thoughts and prayers." redditors: *absolutely devastated.*

That's not how it works...

​@@Danny-vd1njNo no no, he IS paying double!

What's double zero? ​@@Danny-vd1nj

The value of this tax deferral over 20 years is quite impressive. Doctors will continue saving in corporations after this change due to the power of tax deferral. Especially if they have a timeline over 8 years. Doctors can also lobby the Ontario government for more pay.

Yes, I agree the tax doesn’t completely negate the advantages of incorporating, and doctors can still save and get some benefit from tax deferral and compounding. However, it still feels like a betrayal of the good faith of the original deal, like a bait and switch. Back in the day, doctors could have said no to the offer of the ability to incorporate, and just asked for higher fees up front. Also, the increased rate affects any capital gains you want to realize in the future. If a doctor has been compounding for 10-15 years, then this isn’t just more tax going forward, you are being retroactively taxed for the last 10-15 years of financial planning.

@@Xi-op7gg They have a couple months to still take advantage of the old inclusion rate.

True. However, realizing a huge amount of capital gains all at once has other tax implications. For example, that eats into the small business deduction limit. The more capital gains you realize, the less of your corporate income is taxed at the more favourable rate, so you lose out either way.

It's on capital gains over 250K a year... If you are cashing out over 250K a year just on capital gains I don't feel sorry for you having to pay an additional few thousand dollars in taxes.

That applies to canadian assets. But if you have international stocks, they wont be affected by the canadian tax changes

Somewhat cynically, I'm wondering if that was part of the plan of this tax change. If a bunch of investors decide to dump their stock of housing onto the market, that could push prices lower in the short term, just in time for the election. Still a good policy, and I don't think we should be giving capital gains a free pass, but the timing is a bit interesting.

@@NLuck-eh5cd Bursting the housing bubble is long overdue.

@@NLuck-eh5cd I'm confused by your suspicion of timing. The change is approximately 16 months before an election needs to be called by. June 2024 vs October 2025.

Thank you for even knowing that we exist

truly sad for canada and all my strawberry picking friends over there (not a joke)

@@zedev444 How many Canadian earn (profit) $250,000 + per year ? looooooool

LOUD NOISES!!! AHHHHHHHH!!!!!

RAWWWR TAX TAX TAX SOMETHING SOMETHING COMMUNISM RAWWR

This tax system only encourages mediocrity.

Pirate bay?

@@tbird81 trailer park boys

Are you just learning this now?! That's something that really irks me about folms complaining online sometimes, they are complaining about something they learned for the first time that's been around for decades, or in some cases centuries, but treating it as though it's a new thing. I despise the concept of generational wealth, so I have little sympathy about estate tax. However, if it so bugs you, remember to go do something political about it. ...or do as a lot of other folks might say, leave. I can think of a few reasons why myself. But taxes aren't necessarily one of them. That said all the reasons I can come up with for leaving were all problems we've been dealing with for over 20 years. Recently heard someone say you can track the problems all the way back to Pierre Trudeau...and I'm going to guess it can be taken further.

@@chillinchum Centuries? Do you know how the tax system has changed over the past 50 years? It's a simple question. What percentage of the population had to pay death tax in the 1980s?

@@cabbagedestroyer1693 Yes, centuries. France has had inheritance taxes since the French Revolution and Britain since the middle of the 19th century. The concept of taxing inheritances isn’t exactly recent.

@anthonybousquet3590 That is extremely misleading. Yes there was a concept that only applied to 0.1% of the population. Inheritance tax in Europe applied to massive estate owners, and did not apply to the common people. Inheritance tax in the US didn't even exist until 1980s, in which only about 1% of the population was affected. In the British Empire, the succession duty act, again, only affected a small proportion of people and only taxed people between 1 to 10% as opposed to 30 to 50% that we have today. In another word, unless you don't think there's a difference between 1% of the population being taxed at a maximum 10% on Inheritance vs. 100% of the population being taxed at a minimum 30%, then I don't know what to tell you.

@@cabbagedestroyer1693 because back then you dirty peasents wouldn't have anything to pass it on... just like most people in Canada.. you don't have that much to pass on..

Your gonna have a different opinion when all the wealth flees the country and you cant find work.

@@curtis1397didn’t see that happen between 50’s -70’s when the inclusion rate is even higher. Stop being so dramatic.

@@freedomlife3623 You mean when you could save for a down payment in 1 year and pay off a house in 10? Now it takes 10 years to save for a down payment and over 30 to pay it off. Your also talking about a pre-globalized economy, competition is now global. Businesses aren't just competing against joe blow down the street (who also had to pay that inclusion rate). They are competing against every single business in the world that is even remotely similar, many of which are in countries that are much cheaper to operate in. Use some critical thinking and stop eating the spoon fed lies by politicians. When someone challenges your ideas, ask why instead of slinging mud and calling people dramatic. You might learn something.

@@freedomlife3623 Even if it does happen, the correlation could be insignificant. So many factors at play.

@@curtis1397you’re a small business owner that will barely be affected by this unless you make anywhere in the neibourbood of the numbers presented. It’s crazy to me how many wealthy or would be wealthy people are flowing into videos like this to dissuade people from accepting this change. This change is good, it was good when it was higher and is still good now. The rich have harvested the Canadian economic landscape for far, far too long.

It's not that simple. There's only so much that can be done, and going down various loopholes is never cost free, often times it can be counter-productive and may have risks that can go the wrong way. In addition, the legal fees cost money, which means there's less take home to re-invest.

There is no capital gains preferential rate for C-corporations in the US. The only "good" thing about capital gains for C-corporations is that they can offset capital losses, which are otherwise not deductible, unlike with individuals which are allowed $3,000 in capital losses per year with indefinite carryover, while C-corporations have only a 3 year carryback and 5 year carryforward available. There are vastly fewer directly taxed corporations per capita in the US than Canada though, as pass-through entities (some of which may be S-corporations which are technically corporations but aren't taxed directly like C-Corporations) are far more popular. It would be insanity in the US to suggest that a doctor run their business as a C-Corporation and accumulate money in the business in the way that is discussed here. Instead they will have an S-Corporation (or maybe a partnership) and the business's profit will flow through to their personal return, and they can freely add and remove capital from the business without tax consequence. Please also note there is a large difference between a "company" and a "corporation" when it comes to tax law. A "company" is a generic term that US tax law never uses, while "corporation" is a specific term that is used.

@@stevenglowacki8576 thank you. It was really instructive

Step in the right direction? Making it less favorable to set up a business in canada while giving more money to the state to waste is a step in the right direction? When did so many people become communists? Is it the younger generations?

@@epictetus3406a lot of people on the internet never leave their house so they don’t understand how the world works

Sounds like the entertainment industry...

Not uncommon for some businesses to do this, some even only employ workers outside the country so they can cut down on paperwork and taxes. It's a shady as hell practice.

@user-oj7uc8tw9r Not always. When outsourcing stuff online you're competing against people in third world countries with internet so often the best bang for the buck is someone who speaks English as a second language.

@@samsonsoturian6013 Nearly all foreign countries have people who are trained to speak English as a second language and rather well in technical professions. It is not as competitive an edge as you think. The US is way behind in this regard.

I dont believe a sole prop is the same as incorporating

Most doctors and dentists will be effected.

ANYONE with a cottage, investment property, self-employed person with a holding company (NOT just doctors, dentists etc but also blue collar professions such as plumber, electricians etc), anyone who has an ownership interest in a Canadian controlled small business that is not publicly traded. It has been estimated that it could directly effect 20% of Canadians at some point in their life.

@@bogeybichon7000 What capital gains are those small businesses even earning though? As TPB mentioned, they already get tax benefits for selling the business so it's moot there. Plumbers, electricians, etc aren't exactly day trading with their business revenues, so what small businesses are affected?

From a macroeconomic perspective it doesn't matter where you siphon off money from the economy all that matters is how much you siphon. And it does get really technical as there's no one tax that truly "targets the rich" due to technicalities.

​@@bogeybichon7000oh no, those people with investment properties that increased in value by 250k or more are going to be taxed a bit more!! How will they cope

The inclusion rate allows capital gains to be taxed more favourably than regular income without creating a separate set of tax rates. The government still wants to incentivize capital gains income since it promotes investing.

​@@ThePlainBagelahhhhh that makes sense thanks a lot

It's good for poor people with a huge portfolio. Maybe also retirees.

We know how expensive it is, the Government of Canada is estimating that increasing the capital gains inclusion rate will bring in about 4 billion per year in new revenue, that's 4 billion per year not going back to shareholders of these corporations.

@@barettmacwell, someone have to pay for all those programs, why should capital gain being taxed much lower than regular income? We have a corporation, will be happy to contribute a bit more to build a better community.

@@barettmac That said, after a good 30 years of near poverty I landed into some investment money (the old fashioned way, I inherited it) five years ago and was shocked to discover how easy it was to build capital one you had some to invest. It's been awfully close to a free ride for me, and I'm as sceptical of free rides as Adam Smith was; so I welcome the increase in inclusion rate if it's going towards fixing the market failure we're seeing in housing.

Time to tax unrealised gains as well

​@@ziglausya then the market crashes

​@@jimjam6598it needs to, good (I say this as someone who will lose if that happens)

you address supply by building more

@@ziglaus Well that’s just a catastrophically bad idea. Much worse and much more damaging idea than these current tax changes.

That is exactly what I am doing this summer.

So where do you suggest to go for an excellent health care ?

Tax for thee - not for me

Bruh I'm unemployed and broke.

way to miss a point....

Should be like that! You take no risk as a worker without equity!

Essentially boomers get to have one nonstop party all the way to death and then when the newer generations finally get a break by inheriting what their boomer parents leave behind, the government just steals it instead.

I'm also concerned about this, you are correct that it does not take much to earn $250k+ in capital gains upon death and I would like to see someone give their thoughts on how that will (or will not if I am missing something) affect the estate of the average Canadian

110% this. My parents are by no means rich but I had to double check the approximate value of their assets vs their market price. They're under, but by an amount that suggests we know a good number of people that probably are not.

The inheritance tax is only one item to consider, there's also the little mentioned "alternative minimum tax" (AMT) that came into effect this year, it will negatively affect some retirees, and is a double taxation bite at the same time. The government is intentionally lying to Canadians when it says the cap gains tax increase targets only "wealthy people" - WTF is "wealthy" these days? $250K is not a lot of money any longer, neither is $1M when housing can easily exceed $1M in most cities across Canada. There are 3 forms of wealth to consider, one is your net worth, another is your recurring level of income, and the 3rd is the combination of your NW and level of income, ideally both are high, but many have only one or the other, not both. A doctor may have a high recurring income, but relative small NW, while a homeowner who bought a home in the 1990's may now have high NW locked into the home, but has a relative low recurring level of income. Both example are not really "wealthy", they are regular folks trying to get by in life, just like everyone else is. Most high NW individuals in Canada have most of their NW locked into a home, with relative low recurring income, none of them will feel as if they are wealthy. If your NW is locked in a home, then selling it will be required to re-invest into recurring sources of income for retirement (for example, to purchase stock that pays a dividend), the cap gains tax will take a bite out of the re-investment and will lower the recurring income over the rest of your life - and that hurts much more than the government is claiming. The $1M lifetime exemption increase comes with caveats, and the puny increase is a joke, $1M is not high enough any longer.

There's still the primary residence exemption, so I can't think of a huge number of people that will have more than a $250k gain outside of that that aren't dealing with rental properties that remain unsold. Those rental properties if held as a business though would fall under the life time exclusions as well would they not? Anyway, I think the feds 0.13% is misleading, I think the "everyone is doomed" is way over the top.

The rich have an attitude of not giving an inch with regards to tax rates, so whether it's 0.0001% increase or 15%, they will cry the sky is falling, make threats and run hit pieces and propaganda so you might as well go for the hail Mary. If they wanted to set up business in another country they would've done it already if the market is lucrative. California minimum wage is like $18-$20, corporations love whining about minimum wage increases, and they still set up shop here anyway because it's too big a market to ignore.

you can just tell us directly you are poor

@@7PropagandaPanda7 pretty sure that rich people don't make stupid reply like this

You can directly tell us you're a conservative ​@@7PropagandaPanda7

@@7PropagandaPanda7 Bot names aren't getting too creative these days.

It’s because wealthy people have done a very good job of trying to steer people to lean right, which hardcore favours the rich and corporate business. Elon himself probably absolutely hates this idea because it just means he pays more in taxes, which he should. (Not him specifically but people like him)

Perhaps to singapore or malaysia just like nomad capitalist

I mean Texas doesn’t look too bad 🤔

@@elnericoo Texas and Florida have sky high property taxes in every city and county that's worth living in, it's how they make up for the lack of a state level income tax. Nevada is the only state that doesn't have a state level income tax and low property taxes thanks to gambling revenues from Vegas, but Nevada's a desert and Vegas is a dump outside the strip.

Yup was thinking the same thing. Except the housing market point, have you seen the costs of housing in Canada? Look at Toronto and Vancouver.

They don't go to California or the New York friend. And healthcare in canada is not free. There is a huge cost and massive administrative waste.

If there's a meme about it, it's usually bullshit

My life sucks so people who have it better than me should also have their lives suck? This isn't going to make anything cheaper for you at all. Just going to make you feel better by sticking it to people you are jealous of

@@flakgun153 nope, you just need to pay your fair share. Nice try

@MasterMind468 I'm not even Canadian. All I did was explain *your psycology*. And the idea of a fair share of people income to take away from them by force is complete bullshit anyway. Taxes should not be higher than 20% for *anyone* for any reason. That's an opinion. Just like any opinion on what a fair rate is.

@@flakgun153 in canada, there is a housing crisis. The government needs revenue. Wages are low and the richest canadians are making large capital gains, and pay less tax on that than say, a nurse saving lives earning a salary. Nobody needs to generate infinite free money

@MasterMind468 Yes and do you think taxes magically make houses cheaper. If anything this makes it harder for the people who put down money to actually build new construction to justify doing do. And it's not about how much money people NEED. If you want a society that looks like that then go to North Korea. Our society works off of what people want and incentives to do. And the Canadian government would need far more money than it actually could ever get off of taxes to build significant amount of housing itself. And again. Am I wrong in the way I described your psycology? If you actually cared about resolving the housing crisis you would be focused on making it easier to build by any means necessary. Instead you're focused on punishing people who have more than you for the crime of having what you want. Realistically Even if Canada mobilized every single property developer and construction worker it would take decades to resolve. And that's absolutely not going to happen if you make the people who actually know how to navigate the insane amount of beaucracy it takes to build anything and encourage them to build in foreign countries instead.

They already do it in Germany. Unfortunately.

I mean a tax on unrealized capital gains makes sense over a certain period of time. If you are up 100,000%+ as a VC investor that money stays untaxed even if it gives dividends. So if you put a million in apple the day the first Iphone dropped you have a billion dollars in untaxed gains indefinitely. The only taxes youd pay is on the 5.6 million you get annually in dividends.

@@kalibbailey6219no it wouldn’t make sense because say you never sell. Essentially what you did was buy a business that payed you the dividend you deserve. It’s not different than paying for a brick house and its value goes up. That’s why there’s a distinction between realize and unrealized gains

​@@kalibbailey6219 So you only pay taxes on the money you receive. Makes sense to me. Taxing unrealized gains is insanity. The government doesn't need more of our money.

It does make some sense. A popular way the wealthy avoid taxes is borrowing against assets with unrealized gains, allowing them to spend without having income

You don’t know what you’re talking about. This is essentially a 33% increase in tax(67% inclusion divided by 50% inclusion). For a small business to realize 100k of gains they now have to pay an extra 10k in taxes. That’s huge.

@@chihuadogPlease learn mathematics

What do you mean when it was earned? You are only paying taxes on gains, ie new profits.

@@axelnils income tax

Don't say shit like that some people love being taxed 😅

​@@courier3567only the principal have been taxed as income, here they tax additional money you gained from investment, not the original principal

I also hate this idea, because of the prevailing idea that "Canada is a wealthy country". And considering how prices have increased, it means you HAVE TO BE WEALTHY jùst to live in this country

I think the biggest segment of "normal" people affected would be retirees selling their house or cottage when downsizing (assuming it's not the "principal"). Many $250,000 houses 15 years ago are now worth $1,000,000+.

Because governments never expand the pool of who it effects after they get a new tax law passed.

Bad take, im a middle class independent business owner and it affects me. I am no where near even the top 1% and will likely have atleast 250K gains next year. Either your under 30 or work at mcdonalds.

@@questioner1596 If they have over $250,000 in equity on a non-principal property, are we worried about how that extra 8% at most in taxes is going to affect them? This is the whole point. People who have incredible wealth can afford the extra tax. Did I complain about paying $60,000 in taxes after years of never making more than $25,000, because my income went drastically up? No, grow a pair and contribute to your community.

@@jimlamb7642 because wealthy people cannot possibly afford a small percentage extra in taxes.

Or when you sell your buisness/startup, that you built from the ground up.

“People with money”. You mean people with a below average retirement? Children inheriting a family home that has potentially been in the family for generations?

Who has a home worth less than $250K? How many Canadian's, who earn an average wage, also now have a home that's become worth well over $1M? The governments' perception of "wealthy" is incredibly warped.

@@AA-il9pc This has no impact on principal residences.

@@jiecut Not every family home is a principal residence

​@@AA-il9pcthen it is not a "family home"

Someone has more than me, punish them for it. Sounds good till you realize that by virtue of posting here you clearly have enough money to have a computer or at least a phone with internet access which means you have way more than millions of people on the planet, you should be stripped of all of your assets save for enough to have a tent and one meal a day so that those people can have a better life too.

​@@jimlamb7642going extreme in any direction sounds dumb. It's sensible to say that richer people can afford to pay more taxes. This is especially true since the rich often end up paying a lower percentage of tax on their income

​@@laundrygoddess4 at the highest end they don't even pay taxes many times, so what do higher tax rates actually do? Burden the middle income more. The richest people can and always will be able to avoid paying as much taxes because of legal writeoffs. Unless you completely overhaul the system that won't change either. And what do higher tax rates give you? More foreign wars? Certainly not better education or better roadways from anything I've ever seen.

@@Madchris8828 this is one way to tighten the corporate loophole. You can't just go crazy all at once or there will be chaos. Little bits at a time is more successful in the long run

@@laundrygoddess4 You have to go to extreme to make a hyperbolic point because people do not understand complicated nuance as evidenced by the fact that you believe that is true. Everyone pays the same tax on the same brackets that they fall into, 0% up to a certain minimum amount, 10% on the amount above that to another level (in the US), 12% between two other income levels and so on (changes every year or two hence why not quoting the specific amounts). When journalist tell you 'the rich' pay less taxes as a percent, they tell you a half truth because they conflate income tax with capital gains tax and compare them as if they were comparing like things. But the point stills stands because there are many people in the world that think "poor people" in western countries, are spoiled, rich, cry babies and think that those 'rich' people should give up their 'wealth' to help the situations in impoverished places... Rwanda, Haiti, South Africa, as just 3 examples.

No point in not doing it. These people hate you.

​@@amando96the rich, you mean?

This is exactly the tool to close those loopholes though. We should support any law that makes tax evasion more difficult, as anyone who isn't paying their taxes is effectively stealing from you

Not sure I follow your argument here. If a small business owner has invested a million dollars and realizes a capital gain of 5% each year, then 1/3 of that gain is still tax free and the other 2/3 is subject to your normal corporate tax. The only change is to the inclusion rate, which was 1/2. Not sure that most small businesses even have capital gains unless or until they are sold or have to dispose of some property. In the case of the former, they still get preferential treatment than any salaried worker receives by accumulating wealth through their labor. Finally, I don't believe dividend rates are affected by this at all. So small business owners can still pay themselves a small salary and dividends each year, once again resulting in lower taxes than salaried workers with equivalent gross incomes.

@@ziglaus None of this makes evasion more difficult. It just taxes the people who cant evade more.

As impossible as possible, the more workers you keep from retiring the more you can squeeze out of them for your yacht.

It's supposed to be impossible to retire, because that is bad for GDP

Pretty impossible, its why I prefer pensions to 401ks. Problems especially come up in cases where people live a decade or more longer than they expect on retirement planning.

​@@jmizzoniniLine go up

I have never made amazing money and I'll be fine. I don't have wild vacations, renovations or new cars every five years either. Sensible spending allows a comfy retirement