Capital Gains Tax Canada 2026

So you’re selling that cottage your family’s had forever, cashing out stock investments, or maybe finally selling your small business to retire. Good for you, eh? Before you count your gains, here is what matters: the planned increase in the capital gains inclusion rate was cancelled in March 2025, so in 2026 the long-standing rules still apply. This guide was reviewed in October 2026.

Understanding the Inclusion Rate: What It Actually Means

The inclusion rate isn’t the tax itself — it’s the percentage of your capital gain that becomes taxable income. Think of it as the slice that gets added to your regular income and taxed at your marginal tax rate.

Example: You sell a rental property for $500,000 that cost you $300,000. Capital gain = $200,000. With a 50% inclusion rate, you add $100,000 to your taxable income. If your combined federal and provincial marginal rate on that income is about 40%, you’d owe roughly $40,000 in tax, an effective rate of about 20% on the full gain. Your own rate depends on your province and your other income, so try our income tax calculator.

Because the same 50% rate applies to everyone, a large gain is not treated differently from a small one. What changes your bill is your other income for the year and your province’s tax rates.

• Individuals (2026): 50% inclusion on all capital gains. No annual threshold.
• Corporations & trusts (2026): 50% inclusion on all capital gains. The proposed 66.67% rate did not go ahead.

Principal Residence Exemption: Still Tax-Free

Your home remains completely exempt from capital gains tax, regardless of how much it’s appreciated. Sell a house you bought for $400K that’s now worth $1.2M? The entire $800,000 gain is tax-free, provided it was your principal residence for all the years you owned it, and you report the sale and designation on your return.

The catch: you can only designate one property as your principal residence per family per year. Owning a house and a cottage? You need to choose which one gets the exemption when you sell. For many Canadians, strategic timing of sales can minimize overall capital gains exposure.

Lifetime Capital Gains Exemption: $1.25 Million

If you’re selling qualified small business corporation shares or qualified farm or fishing property, you can shelter up to $1.25 million in capital gains from tax. The increase from $1,016,836 took effect on June 25, 2024, and the government confirmed in March 2025 that it would keep it and legislate it in due course. Check the CRA site for the latest limit, since the exemption is expected to be indexed to inflation.

Real example: You started a tech company, grew it for 15 years, and sell it for $3 million (original investment was negligible). Your capital gain is roughly $3M. You can use the $1.25M lifetime exemption to shelter that amount, and the remaining $1.75M is included at 50%, which adds $875,000 to your taxable income.

The Canadian Entrepreneurs’ Incentive proposed in Budget 2024 (a one-third inclusion rate on up to $2 million of gains) is no longer going ahead, so don’t build a sale plan around it.

What Triggers Capital Gains Tax?

You only pay capital gains tax when you dispose of an asset — “dispose” being the CRA’s fancy word for selling, gifting, or transferring ownership. Here’s what commonly triggers it:

• Selling stocks or mutual funds: The difference between your purchase price (adjusted cost base) and sale price.
• Selling rental or investment property: Appreciation minus your original cost and capital improvements (but not repairs or maintenance).
• Selling a business or business shares: May qualify for the lifetime capital gains exemption if it meets CRA criteria.
• Trading cryptocurrency: Every crypto-to-crypto trade or crypto-to-fiat conversion triggers a capital gain or loss. Learn more about crypto taxes in Canada.
• Gifting assets to family: Deemed disposition at fair market value — you’re taxed as if you sold it even though you gave it away.
• Deemed disposition on death: Your estate is taxed on unrealized gains unless assets pass to a spouse (spousal rollover). See inheritance tax implications.

Smart Capital Gains Planning for 2026

With the inclusion rate staying at 50%, there is no deadline pressure to “beat” a rate change. Sell when it makes sense for your finances, and use these legitimate strategies to manage the bill:

• Use capital losses: Losses offset gains in the same year, can be carried back three years, and carried forward indefinitely.
• Shelter growth: Hold investments in a TFSA, RRSP or FHSA where gains aren’t taxed (or are deferred).
• Spread large sales across years: Keeping annual income lower can keep more of your gain in lower tax brackets.
• Use the capital gains reserve: If you’re paid over time, you can generally spread the gain over up to five years.
• Review business sale timing: If selling a company, plan to use the $1.25M lifetime exemption.

For more details on strategic capital gains planning, read our complete guide to taxable capital gains in Canada.