Market Musings

Hello everyone,

We hope you are well and that you all survived the total eclipse of April 8th. For the record, Erik and I are among the few Montrealers who missed this historic phenomenon to gather strategic and economic information at Raymond James' annual portfolio management symposium in Calgary. We also missed the previous one, in 1932, but hope to be available for the next one...in 2205!

Many of you have already asked us about the impact of the new federal budget presented by the Trudeau government on your finances and financial plan. If you own a corporate account or a trust, or if you have significant non-realized personal gains (from investments, as well as from rental properties or a secondary residence), the new budget will have a definite impact.

Corporations and Trusts

If you own a corporate account or a trust, the new changes will result in an increase in the tax to be paid on each dollar of profit earned (approximately eight to nine per cent). The $250,000 exemption you've heard about in the media applies only to assets held in your personal name. Companies and trusts are not eligible for it. In summary, the capital gains inclusion rate increases from 50 per cent to 66.67 per cent from the first dollar (for example, at a tax rate of 50 per cent, the tax payable on a capital gain increases from 50% x 50% = 25% to now 66.67% x 50% = 33.3%). For the management company, this also affects the capital dividend account. It will grow more slowly since it is composed of the non-taxable portion of the capital gain (which has just decreased from 50 to 33.3 per cent).

Real Estate

Furthermore, if you own real estate in your personal name for investment purposes, such as a rental property or a secondary residence, and you have a profit of more than $250,000, you have until June 25, 2024 (about two months!) to make important decisions. If you were planning to sell a property soon, you could save thousands of dollars in tax by completing the sale before June 25. We can arrange a call with our tax consultants if you have specific questions.

Home Buyers' Plan (HBP)

For the younger ones among you, or for your family members, the 2024 budget enhances the HBP program by increasing the maximum RRSP withdrawal for a down-payment on a first property to $60,000 per person (compared to $35,000) and extending the grace period to five years (compared to two years) before starting repayments over a 15-year repayment period.

To stay informed and help you navigate these tax changes, we strongly recommend consulting this comprehensive article written by our tax team (if the article appears in French, please click on "English" in the top right corner for the English version): https://www.raymondjames.ca/commentary-and-insights/tax-planning/2024/04/19/planning-for-changes-to-taxation-of-capital-gains

We will review your portfolios in the coming weeks to determine if it might be beneficial for you to generate some capital gains before the critical date of June 25 (the transaction must be entered before June 20!). Unless realizing more than $250,000 in capital gains in a personal account, which is generally not desirable in a single year, it's mainly for your corporate account and/or trusts where transactions could be prescribed.

Until then, feel free to contact us if you have any questions or need clarification. Your trust is essential to us, and we are committed to providing you with the best advice to protect and grow your wealth.

Warm regards,

Guillaume, Erik, and your wealth management team