On 31 January 2025, Canada deferred the proposed increase in the capital-gains inclusion rate from 25 June 2024 to 1 January 2026.
Then: the government still said it intended to proceed later.
Now: the increase was never enacted. The government cancelled the proposal on 21 March 2025, and Budget 2025 later confirmed that outcome. The enacted one-half inclusion rate remained in place.
This article preserves the operational moment when policy, tax administration and enacted law moved apart. The broader analysis of Canada’s proposal examines the planning cost of that uncertainty.
Three key takeaways
- The January announcement was a deferral, not a cancellation at that date.
- CRA reverted immediately to administering the enacted one-half inclusion rate and undertook to correct the small number of corporate filings prepared on the proposed two-thirds basis.
- The government cancelled the proposed increase in March 2025. That did not cancel every capital-gains measure announced in Budget 2024: the separate C$1.25 million Lifetime Capital Gains Exemption increase was maintained.
What the government announced
Budget 2024 had proposed increasing the inclusion rate from one-half to two-thirds for corporations and most trusts. For individuals, the proposed two-thirds rate would have applied only to the portion of annual capital gains above C$250,000.
The original proposed effective date was 25 June 2024.
On 31 January 2025, the Department of Finance moved that date to 1 January 2026 and said legislation would be introduced in due course. The language mattered: the policy had been postponed, but the government had not yet abandoned it.
What CRA did immediately
CRA responded by returning to the currently enacted one-half inclusion rate for gains realised before the new proposed date.
Corporations could continue using existing forms and tax software on that basis. CRA also said it would coordinate corrective reassessments for the small number of corporations that had followed earlier guidance and filed using the proposed two-thirds rate.
That distinction is the reason this dated update deserves to remain in the archive.
The government changed its intended policy. CRA then changed its administrative treatment. Neither event should be confused with Parliament enacting the proposed increase.
Why the correction mattered
Administration of a proposal can still create real work.
Tax forms, software, calculations and transaction files had been prepared around a measure that remained subject to parliamentary approval. When CRA reverted to the enacted rate, those operational positions had to be unwound.
The episode was not merely political theatre. It created filing and implementation costs before the proposed increase disappeared.
What happened next
On 21 March 2025, Prime Minister Mark Carney announced that the government would cancel the proposed increase. Budget 2025 later recorded the cancellation.
The proposal therefore followed three distinct stages:
- proposed and administered from the 2024 effective date;
- deferred on 31 January 2025, with CRA returning to the enacted one-half rate; and
- cancelled on 21 March 2025 before the increase became law.
It is more accurate to describe this as cancellation of a proposal than repeal of an enacted increase.
What did not disappear
The cancellation did not erase the Canadian capital-gains system or every measure connected with Budget 2024.
The Income Tax Act continued to provide the general one-half inclusion rate. The government also maintained the separate increase of the Lifetime Capital Gains Exemption limit to C$1.25 million for qualifying small-business shares and farming or fishing property.
The practical lesson is narrow but useful: identify exactly which measure moved, which rule remained enacted and which neighbouring measures survived.
Sources
- Government of Canada — Deferral announced 31 January 2025
- Canada Revenue Agency — Return to the enacted one-half rate and corrective reassessments
- Prime Minister of Canada — Cancellation announced 21 March 2025
- Government of Canada — Income Tax Act, section 38
- Government of Canada — Budget 2025
Disclaimer
This article is general historical and tax-policy information, not legal, tax or investment advice. Canadian tax treatment depends on the taxpayer, transaction and relevant year. Current legislation and CRA administration should be confirmed before action.
