FEDERAL
Legislative proposals for donations
On January 23, 2025, the Department of Finance Canada released draft legislation, along with explanatory notes, amending the ITA to make donations made up to February 28, 2025, eligible for tax support for the 2024 tax year. These changes are in response to the postal strike that began on November 15, 2024.
Section 110.1 of the ITA is amended to add subsection (18), which deems a gift made before March 2025 to have been made in a taxation year ending after November 14, 2024, but before 2025 (the “donation year”), instead of the 2025 taxation year. For this to apply, the following statements must be true:
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The gift would be deductible under section 110.1 ITA in computing the taxpayer’s taxable income for the year if it had been made immediately before the end of the donation year;
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The taxpayer deducts the amount of the gift under this section for the taxpayer’s donation year; and
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The gift was made by cash, cheque, credit card, money order or electronic payment.
Section 118.1 of the ITA has also been amended to add subsection (29), which deems a gift made before March 2025 to have been made by the individual in a taxation year ending after November 14, 2024, and before 2025 (the “donation year”), instead of in the taxpayer’s 2025 taxation year. For this measure to apply, the following statements must be true:
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A credit for the gift would be deductible under section 118.1 ITA in computing the individual’s tax liability immediately before the end of the donation year;
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The individual claims the amount of the gift under subsection 118.1(3) ITA for the donation year;
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The donation was made by cash, cheque, credit card, money order or electronic payment; and
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The gift was not made, as the case may be:
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through a payroll deduction; or
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by will, if the individual died after 2024.
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Consult the legislative proposals here.
Consult the explanatory notes here.
Deferral of increase in capital gains inclusion rate
On January 31, 2025, instead of issuing the long-awaited forms for reporting capital gains taxation under the legislative proposals tabled with the Notice of Ways and Means in September 2024, the Minister of Finance and Intergovernmental Affairs, the Honourable Dominic LeBlanc, announced the postponement of this inclusion rate increase and provided details of other planned measures.
Thus, the announced increase in the capital gains inclusion rate from one-half to two-thirds has been postponed until January 1, 2026. This means that 50% of the capital gains and losses on transactions dated between June 25, 2024, and December 31, 2025, will have to be included in the calculation of net income.
In addition, the announced increase in the lifetime capital gains exemption to $1,250,000 has been retained, effective June 25, 2024.
Finally, the new incentive for Canadian entrepreneurs to reduce the inclusion rate on the first $400,000 of capital gains to one-third in 2025 remains in the plans. Ultimately, this incentive will reach a lifetime maximum of $2,000,000 in 2029, growing by annual increments of $400,000 until that date.
Consult the press release here.
Source : Flash fiscal, vol. 33, no 4, Montréal, Association de planification fiscale et financière, February 4th, 2025.
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This letter summarizes recent tax developments and tax planning opportunities; however, we recommend that you consult with an expert before embarking on any of the suggestions mentioned here that might be applicable to your own specific situation.
