Capital gains changes spur cottage market ‘anxiety.’ Will owners rush to sell?

Owners in Canada's cottage market are grappling with changes proposed in the 2024 federal budget that could affect taxes on capital gains. Here's how the market could react.

Looming changes to how capital gains are taxed are spurring some “anxiety” in Canada’s cottage country, some real estate experts say, as owners fret over whether they should rush to sell before the proposals from the 2024 federal budget come into effect this summer.

Budget 2024, tabled by the Liberal government two weeks ago, included a change to the inclusion rate for some capital gains, which are the net profits from the sale of an asset like a stock or investment property.

The proposed changes, set to take effect on June 25, 2024, would see the inclusion rate for capital gains raise to 66.7 per cent for individuals realizing more than $250,000 in annual capital gains. Any such gains worth less than that bar will continue to face the current inclusion rate of 50 per cent.

While principal residences remain exempt from capital gains taxes, secondary properties like investment units or a cottage that’s not an individual’s primary home do face the inclusion rate when sold.

Owners in some of Canada’s recreational property have been worried about the impact the new changes could have on their family cottages, according to experts who spoke to Global News.

Re/Max Canada president Christopher Alexander says agents in recreational markets across the brokerage’s national network have been fielding lots of inquiries about the impact of the proposal capital gains taxes on cottage properties.

For anyone who is trying to get their property sold and the transaction closed before the June 25 deadline, Alexander tells Global News that the listing should be going up by the end of this week at the latest.

This is also the time of year when many cottage owners are in clean-up mode after the winter, tidying up their property, removing downed trees and getting ready for the summer season.