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Capital Gains Inclusion Rate Canada 2026 | Changes Explained

Updated

Current Capital Gains Rates

2024-2026 Rules (Post June 25, 2024)

Taxpayer TypeInclusion Rate
Individuals (first $250K/year)50%
Individuals (above $250K/year)66.67%
Corporations66.67% (all gains)
Trusts66.67% (all gains)

Historical Rates

PeriodInclusion Rate
2000-June 24, 202450%
June 25, 2024+50%/66.67% tiered
Before 200075%

How It Works

The $250,000 Threshold

Your Annual Capital GainsRateTaxable Amount
$100,00050%$50,000
$250,00050%$125,000
$300,00050% on $250K, 66.67% on $50K$158,335
$500,00050% on $250K, 66.67% on $250K$291,675

Calculation Example

ComponentAmountCalculation
Total capital gain$400,000
First $250,000$250,000 × 50%= $125,000
Remaining $150,000$150,000 × 66.67%= $100,005
Total taxable$225,005

Tax Impact Examples

Individual with $300,000 Capital Gain

FactorAmount
Capital gain$300,000
First $250K × 50%$125,000
Next $50K × 66.67%$33,335
Taxable capital gain$158,335
At 45% marginal rate$71,251 tax
Effective rate on gain23.8%

Comparing Old vs New Rules

Scenario: $500K GainOld Rules (50%)New Rules
Taxable amount$250,000$291,675
Tax at 45% marginal$112,500$131,254
Extra tax$18,754

Who Is Affected

Most Impacted

GroupWhy
Real estate investorsLarge property gains
Business ownersShare sales
CottagersSecondary property sales
InheritorsCapital property disposition
FarmersLand sales

Less Affected

GroupWhy
Primary residence sellersExemption still applies
Small gains (<$250K)Same 50% rate
TFSA/RRSP holdersTax-sheltered accounts
Most employeesGains below threshold

Primary Residence Exemption

Still Tax-Free

RuleStatus
Primary residence exemption✅ Unchanged
One per familyStill applies
Years of ownershipCalculate PRE formula

Formula Still Applies

VariableMeaning
(1 + years as PR)Numerator
Years ownedDenominator
× Capital gain= Exempt portion

Strategies to Minimize Tax

Before Large Gains

StrategyDetails
Trigger gains strategicallySpread over years
Use $250K thresholdOne year at a time
Capital gains reserveSpread over 5 years

Capital Gains Reserve

RuleDetails
What it doesSpreads gain over up to 5 years
When availableIf payment received over time
Maximum deferral5 years (20% minimum/year)

Example: $500K Over 5 Years

YearMinimum to ReportTaxable at 50%
1$100,000$50,000
2$100,000$50,000
3$100,000$50,000
4$100,000$50,000
5$100,000$50,000

Each year stays below $250K threshold.

Spousal Strategies

StrategyBenefit
Both spouses hold assetsEach gets $250K threshold
Gift before saleAttribution rules apply
Joint ownershipSplit gains

Corporate Structure

ConsiderationDetails
Corps pay 66.67% on allNo $250K threshold
IntegrationShould net similar to personal
But timingCorporate rate lower initially

Lifetime Capital Gains Exemption (LCGE)

Still Available

Asset Type2025 LCGE Amount
QSBC shares$1,016,836
Farm property$1,016,836
Fishing property$1,016,836
Canadian Entrepreneurs’ IncentiveAdditional (phase-in)

Entrepreneurs’ Incentive (New)

YearAdditional Exemption
2025Up to $200,000
2026Up to $400,000
2027Up to $600,000
2028Up to $800,000
2029+Up to $2,000,000

Applicable to qualifying share sales.

Adjusted Cost Base (ACB)

Track to Minimize Gains

Add to ACBDon’t Forget
Purchase priceOriginal cost
Legal feesOn purchase
ImprovementsCapital additions
Real estate commissionsOn sale

Example

ItemAmount
Purchase price$300,000
Legal fees (purchase)$2,000
Renovations$50,000
Adjusted cost base$352,000
Sale price$500,000
Selling costs$25,000
Proceeds$475,000
Capital gain$123,000

Tax-Loss Harvesting

Offset Gains

StrategyHow
Sell losing investmentsRealize capital losses
Apply against gainsReduce taxable gain
Net capital lossCan carry back 3 years
Or carry forwardIndefinitely

Example

ItemAmount
Capital gain$300,000
Capital loss-$80,000
Net gain$220,000
Under $250K?✅ All at 50%

Superficial Loss Rule

What to Avoid

RuleDetails
30-day ruleCan’t rebuy same asset within 30 days
Includes spouseAffiliated persons
Includes RRSP/TFSASame group
PenaltyLoss denied