Changes to the capital gains inclusion rate and the employee stock option deduction rate (as proposed in Budget 2024) will apply to stock options exercised and shares sold on or after 25 June 2024. The new measure reduces the stock option deduction and capital gains tax exemption from 1/2 of the taxable amount to 1/3 of the taxable amount, if an individual’s annual combined limit of CAD 250,000 has been exceeded. The individual taxpayer can choose how to allocate the preferential tax treatment between the stock option income and capital gains to the extent the combined limit has been exceeded.