After a volatile period of legislative uncertainty, the proposed hike to a 2/3 capital gains inclusion rate was officially cancelled in March 2025. For business owners and investors, the inclusion rate remains securely locked at 50%, preserving critical liquidity for corporate exits, portfolio rebalancing, and real estate dispositions. Meanwhile, federal focus has shifted toward income tax relief — officially lowering the bottom federal tax bracket from 15% to 14% for 2026.
The 50% Relief & Exemption Expansion
With the 2/3 hike scrapped, traditional extraction strategies remain vital. The Lifetime Capital Gains Exemption (LCGE) increase to $1.25 million remains fully enacted — a critical planning anchor for business owners approaching exit.
The 14% Bracket Shift
While the newly lowered 14% bottom bracket reduces overall tax liability, it also dilutes the value of standard non-refundable tax credits — including the Basic Personal Amount — requiring a recalibration of household income-splitting strategies.
The Alternative Minimum Tax (AMT) Reality
Despite capital gains holding at 50%, the revised AMT rules still aggressively target high-net-worth individuals who utilize significant deductions or large charitable donations.
The Advisory Take
The headline tax hikes were successfully dodged, but the underlying mechanics of personal tax credits and AMT have fundamentally shifted. Relying on a pre-2025 tax playbook will result in missed optimization opportunities.