What Business Owners Need to Know About the Capital Gains Deferral
4 weeks ago · 2 mins
For business owners contemplating the sale of their companies, announcements made on January 31, 2025 from the Department of Finance Canada may significantly influence the timing of their decision. The Government of Canada has announced a deferral in the implementation of an increase to the capital gains inclusion rate, which will now take effect on January 1, 2026, rather than June 25, 2024, as initially planned. This change will raise the inclusion rate on capital gains realized annually above $250,000 from one-half to two-thirds.
The delay allows business owners to take advantage of the lower inclusion rate for another 10-months. Under the current rules, only 50% of the capital gains are taxable, and after the change, the taxable portion will increase to 66.67%, likely resulting in a higher tax burden for those who delay their sale until after the new rules take effect.
This additional window is critical for optimizing both the sale process and tax outcomes. The deferral provides an opportunity to maximize after-tax proceeds by selling before the change occurs on January 1, 2026.
With these new timelines in mind, it’s prudent for business owners to consult with financial advisors, accountants, and tax specialists. The decision to sell a business involves complex financial planning, and understanding the potential tax implications of these changes is crucial to making an informed decision.
The government’s decision to delay the capital gains inclusion rate offers business owners a valuable opportunity to assess their options and potentially minimize their tax liability. The window is short; however, there is time for business owners to sell their business by the end of 2025 which has potential to provide them with significant tax savings compared to a sale after January 1, 2026.
More information on the changes on the deferral in implementation of changes to the capital gains inclusion rate can be found here – https://www.canada.ca/en/department-finance/news/2025/01/government-of-canada-announces-deferral-in-implementation-of-change-to-capital-gains-inclusion-rate.html
Peter MacSwain
peter.macswain@confederationgroup.ca
