As part of the 2013 budget, the federal government is proposing to raise the lifetime capital gains exemption limit on the sale of qualified property, such as the shares of a small business, to $800,000, from $750,000, starting in the 2014 taxation year. It will also index the capital gains exemption amount to inflation annually, starting in 2015.
The Income Tax Act currently provides individuals with a lifetime capital gains exemption of up to $750,000 of capital gains realized on the sale of qualified property: a small business corporation, and farm and fishing property. The changes being proposed are being made to better support small businesses, farmers, and fishers, the government says.
For the individual who disposes of shares of a qualifying small business, the $50,000 increase in the lifetime capital gains exemption represents a potential savings of approximately $12,500, says Annie Boivin, vice president of tax and estate planning with Richardson-GMP in Montreal.
Tax practitioners are also applauding the government’s decision to index the exemption amount to inflation.
“It’s long overdue,” says Jamie Golombek, director of tax and estate planning with CIBC Private Wealth, who says this puts the lifetime capital gains exemption limit in line with other programs that are indexed to inflation.
The increase in the lifetime capital gains exemption limit is to apply for all individuals, even those who have previously used the exemption, the government proposes.