The federal government is providing relief to some taxpayers in the wake of widespread capital gains inclusion rate policy confusion. Specifically, Ottawa will allow individuals that are reporting capital dispositions for the 2024 tax year until June 2^nd, 2025, to file their T1 returns without risking arrears interest or late-filing penalties (most T1s that do not qualify for this relief must be filed by their April 30^th due date). T3 trust filers with capital dispositions for the 2024 tax year will now have until May 1^st, 2025, to file their returns (the usual T3 filing deadline for trusts with a 2024 calendar year-end is March 31^st).

The Department of Finance said the relief is intended to provide additional time for ‘… taxpayers reporting capital dispositions to meet their tax filing obligations.’ As we outlined previously, the continued implementation of the federal government’s proposed capital gains inclusion rate increase—which would increase the capital gains inclusion rate from one half to two thirds on all capital gains realized by corporations and most trusts, along with annual capital gains realized by individuals exceeding $250,000—proved controversial after parliament was prorogued in late 2024.

The Canada Revenue Agency confirmed that it would, indeed, administer the proposed measure until the Department of Finance announced a deferral of the capital gains inclusion rate increase to January 1^st, 2026. The original proposed implementation date was June 25^th, 2024. Given the political uncertainty at the federal level, it is unclear if the measure will ever be implemented. For taxpayers, the important point to note is that all capital gains realized before January 1^st, 2026, will be subject to the one-half inclusion rate, except where exemptions apply.

According to the Globe and Mail article that broke news of the penalty and interest relief, a CRA spokesperson said that 2025 T3 tax returns “… where there is a disposition to be reported and the return has a fiscal period ending between Jan. 1, 2025, and Jan. 31, 2025 …” would also be eligible for penalty and interest relief until May 1^st, 2025.

The CRA is advising corporations to use existing tax forms and filing software, while in the coming days it will provide impacted taxpayers with new forms that account for the current one-half inclusion rate (the CRA’s tax forms were in the process of being adjusted for the two-thirds inclusion rate before the deferral necessitated reverting back to earlier forms with the one-half rate).

While affected taxpayers have extra time to file their T1 and T3 returns, a best practice is to always file taxes well in advance of the deadline to help ensure a smooth reporting process.

Current and future tax policies could change significantly in the coming months with the increasing likelihood of U.S. trade tariffs—and the potential for federal counter-tariffs and emergency relief to ease the burden on taxpayers and businesses—the selection of a new Liberal leader and a pending federal election (possibly as early as the spring). As always, rely on our team to provide updates on capital gains inclusion rate changes or any tax policy that impacts you or your organization.

The RH Partners Tax Team

For more information on tax planning and compliance, contact a member of the RH Partners Tax team today.