Change in the tax treatment of employee stock options

Published: January 14, 2021


Applying an annual limit of $200,000 on the amount of employee stock options qualifying for the 50% stock option deduction. The limit will be based on the fair market value of the shares at the time the options are granted. Stock options granted in excess of the $200,000 threshold will be considered ineligible, meaning that the entire benefit realized from the exercise of ineligible options by the employee will now be considered taxable income.

For stock options that are considered ineligible, the employer will now be entitled to a tax deduction equal to the total benefit realized by the exercise of these options by the employee.

Canadian-controlled private corporations (CCPCs) and corporations with revenues of $500 million or less will not be subject to the new rules.

This measure will be introduced on 1 July 2021. Only options granted after that date will be subject to the new rules.