Understanding the New Capital Gains Tax Change: What This Means for Homeowners

In April 2024, Canada’s Finance Minister, Chrystia Freeland, proposed an increase in the capital gains inclusion rate from 50% to 66% for individuals with annual capital gains exceeding $250,000, as well as for corporations and most trusts. This change was intended to generate additional revenue for affordable housing initiatives and address budget deficits.

However, due to political challenges and a suspension of Parliament, the implementation of this change has been deferred to January 1, 2026. For homeowners and real estate investors in Simcoe County, this delay presents an important financial planning opportunity.

Impact on Homeowners in Simcoe County

For those considering selling investment properties, the deferral means that capital gains will continue to be taxed at the current 50% inclusion rate until 2026. This provides a window of opportunity to sell before the tax hike takes effect and potentially save thousands.

Additionally, Simcoe County’s real estate market could experience shifts as investors adjust their strategies ahead of the deadline. Homeowners in areas with a high density of rental properties may see increased listing activity as investors move to sell before the tax rate change takes effect.

Beyond individual investment choices, the changes may also impact housing affordability and rental prices. If investors offload properties to avoid higher taxes, this could temporarily increase housing supply, potentially leading to short-term price stabilization. However, if fewer investors enter the market due to higher tax rates, it may lead to higher rental prices and decreased rental supply over the long term.

Considerations for Real Estate Investors

If you own rental properties, secondary homes, or investment properties in Simcoe County, it’s important to take note of these factors:

• Timing Property Sales – Selling before January 1, 2026, ensures gains are taxed at the lower 50% rate instead of the proposed 66% inclusion rate.

• Market Shifts – More investors may list properties for sale to lock in lower taxes, which could impact supply and demand dynamics in the market.

• Rental Market Impact – With fewer investors entering the market, rental property supply may shrink, leading to higher rental costs for tenants.

• Long-Term Investment Strategy – Consider whether it makes sense to hold onto properties or liquidate assets before the new tax rules come into effect.

Potential Policy Changes Under a New Government

With a federal election likely in 2025, a change in government could significantly alter capital gains tax policies. If the Conservative Party comes into power, there is speculation that they may reverse or modify the proposed tax hike, as they have been vocal about reducing tax burdens on Canadians.

Investors should remain flexible and prepared for policy shifts, as a Conservative-led government may introduce incentives for property investors rather than increased taxation. On the other hand, if the Liberal government remains in power, the capital gains tax increase is almost certain to take effect as planned.

Given the uncertainty around future policies, homeowners and investors should stay informed and make real estate decisions based on their personal financial situations rather than relying on potential political changes.

Tips for Homeowners & Investors

• Consult a Tax Professional – Speak with a financial advisor or accountant to understand how capital gains changes affect your unique situation.

• Stay Informed on Market Trends – Watch for shifts in listing activity, buyer demand, and rental prices.

• Evaluate Your Investment Plan – Consider whether selling before 2026 aligns with your financial goals, especially with an election looming.

Next Steps: Talk to a Real Estate Expert

By planning ahead, you can navigate tax changes, take advantage of rate cuts, and make informed real estate decisions that align with your long-term financial goals.

If you’re thinking about buying or selling property in Simcoe County, now is the time to act before tax changes and market conditions shift further. Book a appointment and speak with a knowledgeable real estate agent to explore your options.