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Capital Gains Tax Changing

Peter Katevatis - Oct 19, 2021
If the Canadian government raises capital gains tax, there are a few key points to keep in mind

As the Justin Trudeau led Liberal Party of Canada still governs a minority with the support of Jagmeet Singh’s NDP, there is growing speculation on the future of tax rates.  Specifically, that our future will include higher tax rates.


I am a Canadian with Greek ancestry, however, I fully support paying taxes (unlike some Greeks historically).  A government has a role to play in our society and many of the goods & services we depend on are funded with taxes.  Here is the breakdown of tax revenue by the federal government in Canada from March 2019 budget:

Composition of Revenues 2018-19


The pie chart above shows that Corporate income tax and GST may be some low hanging fruit to increase tax revenue with higher rates.  Many economists support higher consumption taxes (GST) as a fair method of taxation.


One tax that I suspect will rise is the Capital Gains Tax which is part of Personal Income Tax.  Capital Gains & Losses are created when an asset is sold creating a realized gain or loss.  Assets commonly included as capital gains are Stocks/Equities, Bonds, Mutual Funds, ETFs, Secondary Property (not principal residence), Businesses, Jewelry, Coins, NFTs, and Cryptocurrency (yup, Bitcoin is an asset).


The history of Capital Gains in Canada starts in 1972.  Before this time any capital gains were not subject to tax.  Capital gains are partially tax-free and the amount has changed over time.  The inclusion rate is the amount of capital gains that is added to your income to determine your final tax bill:

Capital Gains History in Canada (source)

Year Inclusion Rate
1972-1988 50%
1988-1990 66.67%
1990-2000 75%
2000 (during the year) Changed to 66.67% then 50%
2001-present 50%


My big prediction (as of October 2021) is that we will be going back to the 1990s level of 75%.  There has been no announcement by the government of Canada, this is purely my own thought.  Also note, Canaccord Genuity Corp does not officially support or share this view.


The entire world has been living in a society of flux during the pandemic and with rules constantly changing we can expect confusion to continue.  The timing of any tax increases is also a question and much like the question of IF taxes will increase the next question is WHEN taxes will increase.


My minor prediction (as of October 2021) is that capital gains tax will rise in the spring of 2022.  Using history as a guide, these announcements happen quickly and immediately. There is usually no warning to make any moves to mitigate taxes to preserve net worth for your family.  The best steps are usually taken far in advance of any government changes. As with any tax issues, I highly recommend talking to your accountant.  If you do not have an accountant, please reach out to us and we can refer you to someone trustworthy.


Your accountant will make a specific recommendation to suit your needs but here are a few points to keep in mind IF capital gains taxes rise:

  • Current unrealized capital gains will be taxed at a higher rate
  • Current unrealized capital losses will have higher value in the future

One common strategy most investors partake in is the seasonal tax-loss selling. The idea is to sell your “losers” to offset any capital gains you have for this calendar year or even the past 3 years.  The theory is, “Why pay tax on current capital gains when you have offsetting losses on the books?”


If you join me in the belief that capital gains taxes will rise it might make sense to realize capital gains sooner rather than later.  This is especially true for assets that you were planning on disposing in the next 12-24 months anyway.  On the flip side, you might want to delay realizing a capital loss until the capital gains inclusion rate is higher.


2021 has been a strange year, so it seems fitting that your tax strategy may be counterintuitive to past seasonalities.