2024 Federal Budget: Capital Gains Hike, AMT Reform, and Housing Measures

Key takeaways

• Capital gains inclusion rate raised to two-thirds for corporations and for individuals on gains above $250,000 annually
• Alternative Minimum Tax exemption increased to $173,205 with a 20.5% rate (up from 15%)
• New Canadian Apartment Construction Tax Credit at 9% for new purpose-built rental housing
• Home Buyers' Plan withdrawal limit increased from $35,000 to $60,000
• Carbon rebate renamed Canada Carbon Rebate with increased rural supplement

The April 2024 federal budget was the most consequential for investors and business owners since the 2017 passive income changes. The headline measure — raising the capital gains inclusion rate — generated intense debate, a brief pre-budget surge in property and business sales, and ultimately a legislative saga that ran through two governments.

Capital gains: the two-thirds proposal

Budget 2024 proposed increasing the capital gains inclusion rate from one-half to two-thirds, effective June 25, 2024. For individuals, the higher rate applied only to net annual gains above $250,000 — the first $250,000 remained at 50%. For corporations and trusts, all gains were subject to the two-thirds rate with no threshold.

The measure was introduced as a Ways and Means Motion and administered by the CRA beginning June 25, even though the formal legislation was not passed before Parliament prorogued. The CRA confirmed it would administer the original 50% rate for 2025 following the government change, and the 2026 budget formally legislated the current rules.

Alternative Minimum Tax overhaul

The AMT, which exists to ensure high-income taxpayers pay a minimum amount of tax regardless of deductions, was significantly overhauled in 2024. The basic exemption amount was increased to $173,205 (from $40,000), protecting most middle-income Canadians from AMT exposure.

The AMT rate increased from 15% to 20.5% — the second federal tax bracket rate. The definition of the AMT base was broadened: 100% of capital gains (rather than 80%) are now included in the AMT base, and only 50% of charitable donation credits are allowed against AMT.

The practical effect: AMT now primarily affects individuals with very large capital gains, significant capital losses claimed against other income, large charitable donations funded by appreciated securities, or complex tax-sheltered investments.

Housing measures

The Canadian Apartment Construction Tax Credit provides a refundable GST/HST rebate equivalent to 9% of the cost of purpose-built rental housing — an increase from the 36% rebate previously available. This effectively reduces the GST/HST cost on new rental construction to zero for qualifying projects.

The Home Buyers' Plan limit increased from $35,000 to $60,000 for withdrawals made after April 16, 2024. The repayment period was also extended, with a three-year grace period (rather than the prior two-year) before repayments must begin — providing more flexibility for buyers in the first years of homeownership.

Business provisions

The budget confirmed the Canada Carbon Rebate for Small Businesses, a refundable tax credit returning a portion of the fuel charge paid by small businesses with fewer than 500 employees. The amounts vary by province and fuel type.

The Entrepreneurs' Incentive — a reduced capital gains inclusion rate of one-third on up to $2 million of lifetime eligible gains from certain small business shares — was proposed, representing a significant change in how founder exits are taxed. This was subject to the same legislative uncertainty as the general inclusion rate change.