Generally, when you sell an investment more more than you paid for it, you have a capital gain. In Canada, not all of that capital gain is included in your taxable income.

Your inclusion rate is the percentage of your capital gain that's included in your taxable income. Since the year 2000, Canadian residents have have a 50% inclusion rate. This means that if you had a $1,000 capital gain, $500 would have been included in your taxable income. If your marginal tax rate is 30%, this meant you would have paid $150 ($500 & 30%) in tax on the $1,000 gain.

Well, friends, the rumors were true: today's federal budget proposes increasing the inclusion rate.

While today's budget is making serious headlines, I think the impact this change will have on you as an individual is likely pretty limited. The proposed increase to the inclusion rate (from one-half to two-thirds) will only apply to annual capital gains above $250,000. Back to our 30% marginal tax rate example from earlier, if you have $1,000 of gains, only $500 will be included in your income. If you have $251,000 in annual capital gains, however, $125,666 will be included in your income (previously it would have been $125,500).

This change does not take effect today, it will apply to gains realised on or after June 25, 2024. So if you think your gains (not even your proceeds, your actual gains) will be more than $250,000 this year, you still have a bit of time to do some tax planning.

This proposed change does apply a bit more broadly to businesses, which is why, in my opinion, it's made such big headlines.