The Canada Revenue Agency (CRA) has announced interest and penalty relief in response to the federal government’s deferral of changes to the capital gains inclusion rate. This update impacts individual taxpayers, trusts, and corporations, particularly those who realized capital gains in the 2024 tax year. Here’s what you need to know and how it may affect your tax obligations.
Background: Deferral of Capital Gains Inclusion Rate Increase
Originally, the federal government planned to increase the capital gains inclusion rate from one-half to two-thirds on capital gains realized on or after June 24, 2024. However, this change has not yet become law. On January 31, 2025, the Honourable Dominic LeBlanc, Minister of Finance and Intergovernmental Affairs, announced that the government will defer the effective date of this increase to January 1, 2026.
Given this deferral, the CRA has confirmed that it will revert to administering the currently enacted one-half inclusion rate for capital gains.
Interest & Penalty Relief for Taxpayers
To ease the burden on taxpayers who may have been uncertain about how to report their capital gains, the CRA is offering interest and penalty relief for late tax filings related to capital dispositions. The relief applies as follows:
- T1 Individual Filers: Late-filing penalties and arrears interest will be waived until June 2, 2025.
- T3 Trust Filers: Late-filing penalties and arrears interest will be waived until May 1, 2025.
It’s important to note that this relief applies only to taxpayers reporting capital dispositions and does not extend to individual or trust filers who do not have capital gains to report.
Implications for Corporate Filers
Some corporate taxpayers may have already filed under the assumption that the two-thirds inclusion rate was in effect. The CRA has stated that it will coordinate corrective reassessments to reverse the application of the higher inclusion rate where applicable.
What Should You Do?
- Review Your Filings: If you reported capital gains with the higher inclusion rate, ensure your tax returns are adjusted accordingly.
- Take Advantage of Relief: If you missed filing deadlines due to the uncertainty around the inclusion rate, you now have additional time to file without penalties or interest.
- Stay Informed: With ongoing uncertainty about whether these changes will be enacted in 2026, taxpayers should remain vigilant and seek professional tax advice to plan accordingly.
At Muia Consulting, we’re committed to keeping our clients informed and prepared for any tax changes that impact their financial planning. If you need assistance navigating these recent CRA announcements or require strategic tax planning, don’t hesitate to reach out to our experts.
Contact us today to ensure you stay compliant and make the most of available tax relief opportunities.
