·· Tax · Investing
Capital Gains Tax Canada 2026
Only 50% of your capital gain is taxed in Canada — the proposed hike to two-thirds was cancelled. What qualifies, what's exempt, and how you structure a sale still matters enormously.
Updated July 2026 · 10 min read · Source: CRA, Department of Finance Canada
The 2024 federal budget proposed raising the inclusion rate to 66.67% on gains above $250,000. That change was deferred, then cancelled by the federal government on March 21, 2025, and was never written into law. For 2026, all capital gains — for individuals, corporations, and trusts — remain at the 50% inclusion rate. One related change did survive: the Lifetime Capital Gains Exemption was raised and is $1,275,000 for 2026.
How Capital Gains Tax Works in Canada
A capital gain is the profit when you sell an asset for more than its adjusted cost base (what you paid, plus certain costs). Canada does not tax the whole gain — only the portion set by the inclusion rate is added to your taxable income and taxed at your marginal rate.
Because only half the gain is taxable, the effective rate on a capital gain is always half your marginal rate — which is why capital gains are among the most tax-efficient forms of income in Canada.
Effective Capital Gains Tax Rate by Province (Top Bracket)
Effective rate = top combined marginal rate × 50% inclusion. These are top-bracket figures; your rate is lower if your income is below the top threshold.
| Province | Top Marginal Rate | Effective CG Rate |
|---|---|---|
| Ontario | 53.53% | 26.76% |
| British Columbia | 53.50% | 26.75% |
| Alberta | 48.00% | 24.00% |
| Quebec | 53.31% | 26.66% |
| Manitoba | 50.40% | 25.20% |
| Saskatchewan | 47.50% | 23.75% |
| Nova Scotia | 54.00% | 27.00% |
| New Brunswick | 52.50% | 26.25% |
| Newfoundland & Labrador | 54.80% | 27.40% |
Approximate 2026 top combined federal + provincial rates. Use the calculator below for your exact income and province.
What's Taxable and What's Exempt
Note: a capital loss can only offset a capital gain — not regular employment income. Unused capital losses carry back three years or forward indefinitely.
Principal Residence Exemption (PRE)
If your home qualifies as your principal residence for every year you owned it, the entire gain is exempt — one of the largest tax shelters available to Canadians. Since 2016, the CRA requires you to report the sale on Schedule 3 even when the gain is fully exempt; failing to report can void the exemption.
Legal Strategies to Reduce Capital Gains Tax
Frequently Asked Questions
50% for individuals, corporations, and trusts. The proposed 66.67% rate was cancelled on March 21, 2025 and never became law. Half your gain is taxed at your marginal rate.
Your marginal rate on half the gain. In Ontario's top bracket the effective rate is about 26.76%; a $50,000 gain costs roughly $13,380. Lower income means a lower rate.
No, if it qualifies as your principal residence for all years of ownership. You must still report the sale on your return, even though the gain is exempt.
It denies a capital loss if you or an affiliated person rebuys the identical security within 30 days before or after the sale and still holds it. It prevents selling purely to book a loss.
$1,275,000, indexed to inflation. It shelters gains from selling qualified small business corporation shares or qualified farm and fishing property, cumulative over your lifetime.