The Canada Revenue Agency (CRA) is advising Canadians who earned capital gains last year to wait before filing their tax returns for the 2025 tax season. This is due to the CRA still working on updating its systems to reflect the current inclusion rate of 50 per cent on capital gains, following a last-minute reversal by the federal government. Taxpayers who earned capital gains on an asset are recommended to wait until the updates are completed before filing their T1 and T3 returns. While the tax forms have been restored to the current rate, changes to the systems and certification of tax software for capital gains reporting are still being finalized.
In response to the delay in updating their systems, the CRA has stated that tax preparation software is being certified for tax returns reporting capital dispositions, with most expected to be certified before the end of March. Until the certification process is finalized for a particular tax software, users may not be able to print or submit their tax return to the CRA. In order to give taxpayers with capital gains more time to file their returns, the CRA has announced that it will waive any penalties and interest for individuals until June 2 and May 1 for trust filers.
The deadline for most individuals to file and pay any taxes owed is April 30, after which penalties and interest may apply. Capital gains are the proceeds from the sale of an asset such as a stock or investment property. In Budget 2024, the Liberals proposed an increase in the inclusion rate to 66.7 per cent on gains realized above $250,000 annually for individuals. However, the federal government announced in January that the proposed changes would be delayed until Jan. 1, 2026. The CRA had already been administering the proposed 66.7 per cent inclusion rate before the government decided to push back the implementation date.
As the CRA works to update its systems and certification of tax software for capital gains reporting, taxpayers are advised to wait before filing their income tax and benefit returns for the 2025 tax season. The CRA is aiming to have most tax preparation software certified by the end of March, but until then, users may not be able to print or submit their returns to the CRA. The agency has also waived penalties and interest for individuals with capital gains until June 2 and May 1 for trust filers to provide more time for filing. The planned increase to the capital gains inclusion rate to 66.7 per cent, initially proposed by the Liberals, has been delayed until 2026, allowing taxpayers to continue reporting gains at the current 50 per cent inclusion rate.
