On the heels of the January 31, 2025 announcement from the Minister of Finance to defer the effective date of the increase to the capital gains/stock option inclusion rate (from 50% to 66.67%) to January 1, 2026, new Prime Minister Mark Carney announced on March 21, 2025 that the liberals would not pursue the legislative change, which effectively means that the capital gains/stock option inclusion rate will remain at its original 50% rate for the foreseeable future.
As addressed in our February 2025 Client Alert, Canada’s April 2024 federal budget originally proposed increasing the capital gains inclusion rate for gains realized on or after June 25, 2024 from 50% to 66.67% for gains exceeding a combined annual limit of CAD 250,000 for both employee stock option income and capital gains realized by individuals.
Companies that adjusted their tax withholding and reporting practices on a go-forward basis for stock options as a result of the contemplated capital gains/stock option inclusion rate increase should re-adjust their practices.
