Middle-class Canadians may still feel the impact of the federal budget’s increase to capital gains taxes, even though the government claims the adjustments will primarily target the wealthiest individuals.

In the 2024 budget unveiled Tuesday, Finance Minister Chrystia Freeland said the government would increase the inclusion rate of the capital gains tax from 50 per cent to 67 per cent for businesses and trusts, generating an estimated $19 billion in new revenue.

Capital gains are the profits that individuals or businesses make from selling an asset — like a stock or a second home. Individuals are subject to the new changes on any profits over $250,000.

The government estimates that the changes would impact 40,000 individuals (or 0.13 per cent of Canadians in any given year) and 307,000 companies in Canada.

Currently, 50 per cent of a person’s capital gains in a given year are taxable as income. As of June 25, 2024, two-thirds of capital gains over $250,000 will be taxable under new rules introduced in the budget.

The policy will have the greatest effect on the wealthiest Canadians who have large amounts of money tied to investment earnings that are outside of sheltered tax accounts, such as a registered retirement savings plan or tax-free savings accounts.

The changes would also apply to all capital gains realized by corporations and trusts, regardless of the $250,000 bar.

Selling a primary residence will remain excluded from capital gains taxes under the proposal.

The federal government projects that 28.5 million Canadians will not have any capital gains income next year, while three million others are expected to have proceeds below the $250,000 annual threshold.

The federal government estimates that only 307,000 corporations in Canada (12.6 per cent) have capital gains and will be affected by the changes.

However, some members of the business community say that expanding the taxable amount will devastate productivity, investment, and entrepreneurship in Canada, and might even compel some of the country’s talent and startups to take their business elsewhere.