What Happened to the Canadian Entrepreneurs' Incentive
This post has been corrected. The version published in November 2024 described the Canadian Entrepreneurs' Incentive as an active program and got several of its figures wrong. The incentive was cancelled in Budget 2025 and never came into force. What follows is the accurate account.
If you read anything about Canadian small business tax during 2024 or 2025, you probably saw the Canadian Entrepreneurs' Incentive mentioned. It came up a lot. It no longer exists, and the story of why is more useful to a young founder than the rule itself ever was.
What it would have done
The incentive was announced in the April 2024 federal budget. The idea was to tax part of the gain from selling a qualifying business more lightly: an inclusion rate of one third instead of the usual one half, on a lifetime limit starting at $400,000 and rising by $400,000 a year until it reached $2 million.
It was aimed at founders selling a business they had built. Several kinds of business were excluded, among them professional practices, restaurants and hotels, arts and entertainment, and finance, insurance and real estate. In August 2024 the government widened who could qualify and dropped the requirement that you be a founder.
Why it never arrived
It was tied to a bigger fight. The same 2024 budget proposed raising the general capital gains inclusion rate from one half to two thirds, and the entrepreneurs' incentive was partly there to soften that for business owners.
The increase was deferred to January 2026, then cancelled outright in early 2025. Once the thing it was softening had gone away, the incentive went with it. Budget 2025 cancelled it.
What applies now
The general capital gains inclusion rate is still one half. The Lifetime Capital Gains Exemption survived and was increased. It now shelters a little over $1.25 million of gain on the sale of qualifying small business shares, or qualifying farm and fishing property, and is indexed each year.
None of this is tax advice, and none of it is something a fourteen year old selling prints at a market needs to think about. It matters much later, if a business ever grows into something somebody wants to buy.
The part worth keeping
Two things are worth taking from this, and neither of them is a number.
The first is that tax rules aimed at business are political, and they move. A rule announced in a budget is a proposal, not a law. Between the announcement and the law there is drafting, consultation, argument, and sometimes a reversal. Plenty of people spent 2024 planning around this one.
The second is the habit of checking the date on anything you read about money. This post was wrong for more than a year because nobody came back to it after the rules changed. That is an ordinary way for writing about tax to go bad, and the fix is not cleverness. It is looking again.
If you want the part of business that a young person can act on now, the course starts with problems worth solving rather than with tax.
Sources
- Government announces details on the new Canadian Entrepreneurs' Incentive, Department of Finance Canada, August 2024
- The Canadian Entrepreneurs' Incentive appears to be cancelled, Doane Grant Thornton
- Capital gains inclusion rate change planned for 2026 cancelled, Wolters Kluwer