Looking Ahead: Preparing Your Business for Canada’s 2025 Capital gains & Entrepreneur Tax Changes
By your friendly and mildly stressed Canadian bookkeeper with a calculator in one hand and a Tim Horton’s coffee in the other
Well, folks, grab your receipts and your emergency
maple syrup stash, because tax changes are coming – and they’re about as subtle
as a moose in a canoe.
If you’ve been pretending not to read the news (no
judgment, I do the same when my hockey team loses), let me fill you in: Canada’s
2025 capital gains and entrepreneur tax updates are rolling in like a snowstorm
in April – unexpected, inconvenient, and guaranteed to make everyone say, “Wait,
what now?”
So, let’s talk about what’s changing, what it means
for your business, and how to prepare without completely losing your marbles
(or your margin).
Let’s start with the big headline:
The capital gains inclusion rate is going up. Yes, you
read that right. Starting in 2025, 2/3 of your capital gains will now be
taxable, up from the current 50%.
That’s right. It’s the tax equivalent of going to grab
your usual Timbits and being told, “Actually, it’s $6 now, and we’ve added
extra raisins.”
Translation for Real Life:
- ·
You sell an asset for a gain
- ·
More of that gain now gets included in your taxable
income
- ·
You pay more tax
- ·
I gently but firmly remind you that I TOLD YOU this would
happen.
This matters big time if:
-You’re selling your business
-You’re cashing out investments
-You’re selling appreciated property (like that
sketchy rental you bought in 2010 that’s somehow now work $900K)
Entrepreneur Tax
Adjustments: Now with 20% More Confusion
Next up: changes to the Lifetime Capital Gains
Exemption (LCGE) and small business deductions. Because why not throw in a
little extra chaos for the self-employed heroes of this nation?
-LCGE is going up slightly, which is great… if you
plan on selling your incorporated small business and retiring to PEI in a hammock.
BUT there are new tests to qualify. Because obviously
what entrepreneurs need is MORE tests.
So, unless your business is squeaky clean, actively
operating, and not just holding a bunch of random assets like a tax shelter dragon
hoarding gold, you may not qualify. (Ask me to check. I love digging through
your financial dragon hoard.)
What Should You Actually
DO About It?
I’m so glad you asked, imaginary reader voice in my
head! Here’s how to prepare like a true Canuck business owner:
-Talk to your tax pro as soon as possible –
find out how your business sale will cost you more than your retirement cottage
in Muskoka. Start the convo now.
-Incorporate (if you haven’t) or review your corp
(if you have): This is the part where I lovingly shout into the void – Your
business structure matters! A sole proprietorship, a partnership, and a
corporation will be affected differently by these changes. Let’s get your ducks
in a row (or at least waddling in the same general direction).
-Brace your cash flow: If you must sell
in 2025, or realize gains in 2025, make sure you’ve got the liquidity to cover
the tax bill. The CRA doesn’t take “oopsies” as a valid payment method.
Final Thoughts from the
Tax Trenches
These 2025 changes may sound like bad news – but really,
it’s just the CRA reminding us that they always want a bigger slice of
the pie. (And by “pie,” I mean your profit. Sorry.)
As your friendly neighborhood bookkeeper, I’m here to
help you:
-Make sense of it all
-Avoid nasty surprises
-And maybe even benefit from some of these
changes if we plan smart
So, dust off those financials, pour yourself a strong
cup of coffee (or something stronger), and let’s get ahead of this. Because no
one wants to be the person Googling “capital gains panic, what to do” later on
this year.
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