Capital Gains Tax — Canadian Capital Gains Tax
Last updated April 24, 2026 · By Evermore Private Wealth · Tax Concept
Capital Gains Tax — Canadian Capital Gains Tax. In Canada, capital gains are taxed by including a portion of the gain in your taxable income. Until June 2024, the inclusion rate was 50% for all gains. The 2024 federal budget raised the inclusion rate to two-thirds (66.67%) on individual gains above $250,000 per year and on all corporate and trust gains, while keeping the 50% rate on the first $250,000 of personal gains. The Lifetime Capital Gains Exemption (LCGE) on qualifying small business shares was simultaneously raised to $1.25M.
Source: Income Tax Act, s. 38
Source: Federal Budget 2024
Source: CRA, indexed annually
How Canadian capital gains are calculated
A capital gain is the difference between the proceeds of disposition and the adjusted cost base (ACB) of the asset. Gains are recognized when the asset is sold, gifted (other than to a spouse), or deemed disposed (at death, on emigration, or on transfer to a trust). Half of personal capital gains under $250,000/year — and two-thirds of personal gains above that, and of all corporate and trust gains — is added to taxable income and taxed at your marginal rate.
Capital losses and ACB tracking
Capital losses can be used to offset capital gains in the current year, carried back three years, or carried forward indefinitely against future gains. Tax-loss harvesting — deliberately selling losers in November/December to offset realized winners — is one of the few legitimate ways to permanently reduce Canadian investment tax. Be aware of the 30-day superficial-loss rule: repurchasing the same security within 30 days denies the loss and adds it to your ACB instead.
What this means for HNW Canadian families
The 2024 inclusion-rate change made $250,000 the most important number in Canadian personal tax planning. Below that annual threshold, gains are still taxed at the historic 50% rate; above it, an extra 16.67% inclusion bites. For HNW clients with concentrated stock positions, founder shares post-sale, or appreciated real estate, we now sequence dispositions across multiple years to keep each year under $250k where possible. For corporate-held investments, the higher rate applies to the entire gain — which is one more reason the 2018 + 2024 changes have made corporate-held passive investing materially less efficient than it was a decade ago.
Worked example — $400k gain post-2024
An Ontario investor sells a $400,000 capital gain in 2026 in a non-registered account.
- First $250,000 of gain × 50% inclusion = $125,000 added to taxable income.
- Remaining $150,000 × 66.67% inclusion = $100,000 added to taxable income.
- Total taxable amount: $225,000.
At a 53.53% marginal rate, tax owing is approximately $120,400. Under the pre-June-2024 50% inclusion regime, the same gain would have produced $200,000 of taxable income and roughly $107,000 of tax — a $13,400 increase per $400k of gain. Splitting the disposition across two years (under $250k each) would restore the lower-inclusion treatment.
Common Questions
What is the capital gains inclusion rate in Canada in 2026?
For individuals, the first $250,000 of capital gains in a calendar year is included in income at 50%. Gains above $250,000 (and all corporate and trust gains) are included at 66.67%. The change took effect on June 25, 2024.
What is the Lifetime Capital Gains Exemption (LCGE)?
The LCGE is a personal tax-free allowance — $1.25 million for 2026, indexed annually — available against capital gains realized on the sale of qualifying small business corporation shares, qualified farm property, or qualified fishing property. Each individual has their own LCGE, which is why family share structures (often via a trust) are used to multiply the exemption across spouses and adult children.
How do capital losses work in Canada?
A capital loss can offset a capital gain in the same year, be carried back up to three years to recover taxes paid on prior gains, or carried forward indefinitely. Allowable Business Investment Losses (ABILs) on small-business corporation shares can additionally offset ordinary income — useful when a private business investment fails.
Are gains on a principal residence taxable?
No — Canada's principal residence exemption shelters the full gain on a property that has been your principal residence for every year of ownership. Since 2016, the sale must be reported on Schedule 3 of your return even when fully exempt. Foreign buyers, multiple properties, and changes in use create complications that typically need professional advice.
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