What’s your game plan for winding down your Capital Gains tax liability?
Yesterday Canada’s Finance Minister presented the government’s latest budget. there had been many fears about the potential increase of capital gains taxation. To do so would not only disproportionately affect the wealthy but also those who have chosen real estate instead of traditional stock and bond investment portfolios as their core investments.
Almost a decade ago the feds introduced the TFSA. Between that and the RRSP, many Canadians of modest means will recognize no capital gains to the extent they channel all their savings into one of those two accounts. Of course those restrict investing directly in investment properties so that really only helps traditional stock and bond investors.
Furthermore, once you have a little more wealth you are likely saving/investing far more than your TFSA and/or RRSP will allow so likely you have direct tax exposure (capital gains and otherwise). Adding to that the recent strong rise in Canadian real estate and many high net worth Canadians are sitting on a dramatic unrealized taxable capital gains.
This means increasing the capital gains taxation would fulfill the current government’s aim to have the wealthy pay a bigger share. Don’t forget this may also apply to your cottage, condo, or hobby farm.
Delayed but not Allayed
In large part to wait for the outcome of US tax reform, the government has stalled any significant changes to Canada’s Income Tax Act but that doesn’t mean it isn’t still coming down the pipeline.
Foresight is leading prudent Canadians to have a financial plan for winding down the tax exposure from their recent investing success, whether in non-sheltered stock and bond investments or in directly owned real estate.