After two years of uncertainty, the answer is settled: Canada's capital gains inclusion rate stays at 50% for 2026. The April 2024 federal budget proposal to raise it to 66.67% on gains above $250,000 was cancelled on March 21, 2025, and the CRA reverted to administering the 50% rate for all dispositions.
How it works: half your net capital gain is added to your income and taxed at your marginal rate — there is no separate lower "capital gains rate" in Canada. A $100,000 gain means $50,000 of taxable income.
The math, step by step
| Step | Amount |
|---|---|
| Sale proceeds minus ACB and selling costs (the gain) | $100,000 |
| Taxable capital gain (50% inclusion) | $50,000 |
| Tax at ~43% marginal (Ontario, mid-bracket) | ~$21,500 |
| Effective tax on the full gain | ~21.5% |
Your marginal rate depends on total income — the taxable gain stacks on top of your other income and can push you into a higher bracket.
The two big exemptions
- Principal residence exemption: the sale of your principal residence is fully exempt — but you must still report it on Schedule 3/T2091. Only one property per family per year can be designated.
- Lifetime capital gains exemption (LCGE): $1,250,000 of gains sheltered on qualifying small-business shares and farm/fishing property (2025+). Maximum deduction $625,000 at the 50% inclusion rate.
- The cottage question: cottages are not principal residences (unless designated) — the gain is fully taxable at 50% inclusion. Keep ACB records: purchase price plus capital improvements (that $35,000 dock rebuild reduces your gain dollar-for-dollar).
Losses: the silver lining
Capital losses offset capital gains — carry back 3 years or forward indefinitely. Tax-loss harvesting (selling losers in December to offset winners) is legitimate year-end planning; just respect the superficial loss rule (no repurchasing the same security within 30 days).
History note: CRA briefly administered the proposed 66.67% rate for gains realized June 25–December 31, 2024. That period is over — for 2024, 2025 and 2026 tax years, apply 50% to all gains regardless of amount.
Frequently asked questions
What is the capital gains inclusion rate for 2026?
50% for all capital gains, for individuals, corporations and trusts. The proposed 66.67% rate on gains above $250,000 was cancelled on March 21, 2025 and never became law.
How is capital gains tax calculated in Canada?
Subtract your adjusted cost base and selling costs from proceeds to get the gain; include 50% in income; pay tax at your marginal federal + provincial rate. There is no separate capital gains tax rate.
Is the sale of my home taxable in Canada?
No — the principal residence exemption fully shelters it, though you must still report the sale. Only one property per family per year can be designated as a principal residence.
What is the lifetime capital gains exemption?
$1,250,000 of gains on qualifying small-business shares, farm or fishing property can be sheltered over your lifetime (maximum deduction $625,000 at the 50% inclusion rate).
Can capital losses reduce my tax?
Yes — net capital losses carry back 3 years and forward indefinitely against taxable capital gains. Watch the 30-day superficial loss rule.
Sources and methodology
- HomeCalc: Capital Gains Inclusion Rate Canada 2026
- HomeCalc: Determining Capital Gains Tax in Canada 2026
- Taxes for Expats: Capital gains tax in Canada 2026 guide
This article provides general information for planning purposes, not professional advice or a quote. Cost figures are NorthPeak planning estimates unless a source is named; confirm current prices with licensed local contractors and professionals before making decisions.