Article content

With the federal deficit now estimated to come in at $18 billion (or more), there is nervous speculation that Finance Minister Bill Morneau may go beyond the specific tax changes already detailed in the Liberal pre-election platform and introduce new measures in his March 22 budget to raise much needed tax revenue. One such measure being discussed in the financial and tax community is whether the government might raise the tax rate on capital gains.

A capital gain occurs when you dispose of property, such as a stock, bond or mutual fund, for more than you paid for it and is only relevant if you hold such investments in a non-registered account (i.e. outside your RRSP, RRIF, TFSA or other tax-preferred account).

We apologize, but this video has failed to load.

tap here to see other videos from our team. Try refreshing your browser, or Why a capital-gains-tax hike might be on the table in the March 22 federal budget Back to video

Under the current rules, only 50 per cent of capital gains are included in taxable income, so the effective tax rate on capital gains is 50 per cent of your marginal tax rate on ordinary income, such as employment, business or interest income. For high-income earners, that means the effective marginal tax rate on capital gains in 2016 can exceed 25 per cent.