Middle-Class Tax Cuts

The most immediate tax implication under Prime Minister Mark Carney’s Liberal government is a reduction in income taxes for middle- and low-income Canadians. The government has announced a middle-class tax cut that reduces the marginal tax rate on the lowest tax bracket by 1 percentage point. This change is projected to benefit over 22 million Canadians, with two-income families saving up to $825 annually.

Cancellation of the Carbon Tax

Another significant shift is the official cancellation of the federal consumer carbon tax. This move is expected to lower fuel costs, saving Canadians on average 18 cents per litre at the gas pump. Ontario households and small businesses will see direct savings on transportation and heating costs, which may also have a positive ripple effect on the cost of goods and services.

First-Time Home Buyer Incentives

The Liberals have eliminated the Goods and Services Tax (GST) on homes up to $1 million for first-time buyers. For Ontarians entering the housing market, this could mean savings of up to $50,000 on a new home purchase, making homeownership more accessible in high-priced markets like Toronto and Ottawa.

Capital Gains Tax: No Planned Increase

Unlike the previous government’s 2024 budget proposal, the Carney Liberals have abandoned the planned increase in the capital gains inclusion rate. The earlier plan would have raised the taxable portion of capital gains from 50% to 66.7% for individuals with over $250,000 in annual gains, and for all gains realized by corporations and trusts. By reversing this, the government is maintaining the status quo, which benefits higher-income investors and business owners by keeping capital gains taxes lower than anticipated. For investors with significant investment portfolios or business interests, this means no immediate increase in tax liability from capital gains.

Other Targeted Incentives

The Carney government is expanding dental coverage for Canadians aged 18–64, which, while not a direct tax change, reduces out-of-pocket health expenses for many families. There are also new incentives for rental housing construction, which may indirectly benefit Ontario investors and developers through improved market conditions and potential tax credits.

Fiscal Outlook and Deficits

While these tax cuts and incentives are designed to make life more affordable, they come with a cost. The government’s plan includes increased federal deficits over the next four years, in part due to lost revenue from tax reductions and the reversal of capital gains tax changes. This could have long-term implications for public services and future tax policy.

Have a great weekend,

Tracey and Paige

Source: https://liberal.ca/plan/

Photo by Praveen Kumar Nandagiri on Unsplash

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