Planning Around The New Capital Gains Inclusion Rate

As a real estate investor, you’re probably already planning for your real estate portfolio to

appreciate over time. This appreciation in property value will inevitably give rise to a capital gain

when you sell. Given the recent changes to the Capital Gains Inclusion Rate, here are some key

considerations you should make for long-term planning:

1) Reconsider whether to own rental properties personally vs corporately. For

individuals, the higher capital gains inclusion rate only applies to gains in excess of

$250,000 in a calendar year. For corporations, all capital gains are subject to the higher

inclusion rate. If selling a property is in the cards, you’ll pay less tax on personally-owned

real estate at the time of sale.

2) Stagger your property sales appropriately. Given the $250,000 annual threshold for

the higher inclusion rate, avoid (where possible) selling too much property in a single

calendar year. If given the choice, spreading large gains over multiple years will result in

a much smaller tax bill.

3) Review your estate plans. By not selling your real estate portfolio in your lifetime, you’ll

defer triggering capital gains tax, but not indefinitely. When you pass away, those

looming capital gains will be realized on your final tax return. Be sure to update your life

insurance, your will, and discuss with beneficiaries, so that the tax consequences of this

new legislation don’t take anyone by surprise.

—Thomas Johnson, CFP®, B.Comm.(Hons.)—
Cascade Financial Group Inc.