The federal government’s increased capital gains inclusion rate has taken effect as of Tuesday.
It means two thirds of profits over $250,000 made from sales will be subject to a federal tax. Previously only 50 per cent of gains over $250,000 were taxed.
For people like Andree Cooligan, who has her Lanark-area cottage listed for sale, it means she will likely have to pay more in tax when it is eventually sold.
“It’s listed just under half a million,” she tells CTV News. “And when I bought it 21 years ago, I bought a small piece.”
Cooligan has since expanded her waterfront property on Bennett Lake to three acres. But with the recent rapid increase in property values, it means the price she will sell it for will likely be more than $250,000 over what she bought it for.
“This place is very modest. Now, the reason it has value, though, it’s not necessarily these buildings. It’s the land,” Cooligan said. “Yes, there will be capital gains for me. Yes, I’ll pay it. And yes, it will be more than if I had sold last year.”
The higher capital gains inclusion rate was brought in by the federal government to target the wealthiest portion of Canadians to pay a fairer share of taxes.
The government anticipates it will bring in $6.9 billion under the new rate.
But Carleton Place realtor Stephanie Mols says isn’t fair to many in the middle class, many of whom have been priced out of their cottages or recreational properties due to inflation, or who have inherited secondary properties.
“This is a real hit for those specifically that have lakefront or a cottage inherited that had a $1 land transfer just to change title,” she says.
Mols says there are roughly 150,000 cottages in the Ottawa Valley region, and those most heavily impacted are the properties valued in the $500,000 to $1 million range.
“Once we had the announcement, a lot of listings went up, and I would say deliberately under evaluated just to make sure that they sell it [before the deadline].”
The valley-based realtor says those who were not able to sell in time to maximize their profit should wait until there is a political shift, where the inclusion rate increase may be reversed.
“My personal take on that is if you didn’t sell until now, hold on to your property.”