I’ve been fielding many calls from people about the new inclusion rate rules/rates since they were announced in the most recent federal budget. Once people understand how it works, and considering that most cottages are held jointly by both spouses, who can effectively split the gain (as in a $500K capital gain becomes a $250K CG for each spouse).
For example, a couple sold a cottage and made a healthy $1,000,000 capital gain. They’d split that 50/50, giving each spouse a $500,000 gain. The difference between the old and the new rates would be only $22,304 higher. Assuming each spouse was retired and each received a $60,000 retirement income, they’d each pay approximately (at a 34% marginal rate) $7,500 more in taxes.
I don’t think that will kill anyone, and that’s a million-dollar CG, which we rarely see in our market. However, it will make a difference for corporations and trusts, as the budget proposed increasing the capital gains inclusion rate to two-thirds (66.67 percent) for the entire gain. In the future, it will likely change the way people take title to recreational real estate.
