The federal government confirmed that the new capital gains tax changes will only affect the wealthy, but some property owners say they are hearing from "middle-class" cottage owners who have expressed concern and that they need to sell before the rules take effect on June 25.

John Fincham, a broker with Re-Parry Sound Muskoka Reality, told CTV News Toronto, "Most of the calls I receive are from people wishing to pass their homes on to their children, rather than sell them, and they are very upset because these properties have belonged to their families for years."

After cottage prices hit record levels during the pandemic, along with rising interest rates, Fincham now expects prices to decline with the tax changes.

When the new capital gains rules take effect on June 25, Fincham said some owners are concerned about the additional amount they will have to pay the government when they sell their properties.

If a cottage is bought for $250,000 and later sold for $750,000, under current tax rules, that would be a capital gain of $500,000. At a rate of 50 percent, the taxable capital gain would be $250,000.

However, on June 25, 2024, the same property bought for $250,000 that was sold for $750,000 will have the first $250,000 of the 50 percent capital gain amounting to $125,000. In addition to that, an additional $250,000 will be subject to a tax rate of 66.7 percent, which equals $166,750.

The taxable gain on the same property will increase from $250,000 to $291,750.

Some families have had their cottages in the family for 50 years or more, and thus the capital gains taxes they may have to pay could be hundreds of thousands of dollars.

Fincham stated, "It doesn’t really matter if you plan to hand them down or you want to sell; it will cost them a lot of money in either case, and they (some homeowners) are not necessarily wealthy people."

Evelyn Jacks, president of the Knowledge Bureau and author of 55 tax books, said, "This is a significant tax increase and will affect many people."

Jacks pointed out that while some cottage owners may consider trying to sell their properties to avoid paying additional capital gains before June 25, families should not rush into making such a significant decision.

Jacks advised, "Instead, I would err on the side of proper planning, bringing the family together and ensuring that the cottage passes to the right people in the family. These are all important considerations."

There could be a silver lining if you are thinking of buying a cottage, and Fincham feels that prices may drop an additional five to ten percent.

Fincham said, "I expect an increase in listings in the next month and a half, which may lead to price erosion, as there are already a lot of listings."

Jacks recommends that families with cottages seek professional help in financial and tax advice before making any decisions, as there may be ways to restructure a property or reduce the amount of tax owed.