Capital gains tax changes in Canada: what investors need to know
Published: Sep 29, 2026
Key Takeaways
Capital gains tax changes in Canada have been widely discussed due to proposed legislation, implementation deferrals, and Canada Revenue Agency (CRA) administration updates.
The CRA currently administers the enacted one-half capital gains inclusion rate for capital gains realized before January 1, 2026, unless an exemption applies. The proposed increase to this rate was cancelled on March 21, 2025, so no change to the inclusion rate is currently pending.
The capital gains inclusion rate determines the portion of a capital gain included in taxable income.
A capital gain may arise when capital property is sold for more than its adjusted cost base, minus eligible outlays and expenses.
The inclusion rate is separate from an individual's tax rate.
Capital gains can apply to investments such as stocks, exchange-traded funds (ETFs), mutual funds, bonds, and other capital assets, depending on the circumstances.
Account type can affect how investment gains are treated for tax purposes.
Key Takeaways
Capital gains tax changes in Canada have been widely discussed due to proposed legislation, implementation deferrals, and Canada Revenue Agency (CRA) administration updates.
The CRA currently administers the enacted one-half capital gains inclusion rate for capital gains realized before January 1, 2026, unless an exemption applies. The proposed increase to this rate was cancelled on March 21, 2025, so no change to the inclusion rate is currently pending.
The capital gains inclusion rate determines the portion of a capital gain included in taxable income.
A capital gain may arise when capital property is sold for more than its adjusted cost base, minus eligible outlays and expenses.
The inclusion rate is separate from an individual's tax rate.
Capital gains can apply to investments such as stocks, exchange-traded funds (ETFs), mutual funds, bonds, and other capital assets, depending on the circumstances.
Account type can affect how investment gains are treated for tax purposes.
Capital gains tax changes in Canada have been a significant topic for investors, business owners, and taxpayers in recent years. Much of the discussion has centered around proposed changes to the capital gains inclusion rate, implementation delays, and subsequent government updates.
The topic has generated questions because several announcements affected how the proposed rules would be administered and when they could potentially take effect. As a result, many Canadians have sought clarification on the current status of the legislation and how capital gains may be treated for tax purposes. The proposed rate increase itself was cancelled on March 21, 2025, so this one-half rate is not scheduled to change.
The current position is that the Canada Revenue Agency has reverted to administering the currently enacted one-half capital gains inclusion rate for capital gains realized before January 1, 2026, unless an exemption applies.
This article explains the current state of the rules in plain language, including how capital gains work, what the inclusion rate means, and how the proposed changes evolved.
This article is provided for general educational purposes only and does not constitute tax, legal, accounting, or investment advice.
What are capital gains tax changes in Canada?
The phrase "capital gains tax changes Canada" generally refers to proposed and enacted rules affecting how capital gains are calculated and how much of those gains are included in taxable income.
A capital gain may occur when capital property is sold for more than its adjusted cost base, after accounting for eligible outlays and expenses incurred during the disposition.
Examples of capital property may include:
Stocks
ETFs
Mutual funds
Bonds
Land
Buildings
Small business shares
Other property held on capital account
In simple terms, a capital gain can generally be calculated as:
Proceeds of disposition minus adjusted cost base minus eligible outlays and expenses
The resulting gain may then be subject to the capital gains inclusion rate, which determines the taxable portion included in income.
Not every disposition results in a capital gain. Depending on the sale price and costs involved, a capital loss may also arise.
While investment assets are commonly associated with capital gains, special rules may apply to certain types of property, businesses, corporations, trusts, fishing property, principal residences, and other circumstances.
What is the capital gains inclusion rate?
The capital gains inclusion rate refers to the portion of a capital gain that is included in income for tax purposes.
According to the Department of Finance Canada, one-half of a capital gain is currently included in computing a taxpayer's income.
The inclusion rate is often misunderstood as being the same as the tax rate. However, the two concepts are different.
The inclusion rate determines how much of the gain becomes taxable income.
The tax rate determines how that taxable income may ultimately be taxed based on factors such as:
Total taxable income
Province or territory of residence
Available deductions
Tax credits
Individual circumstances
For example:
Capital gain: $1,000
Inclusion rate: one-half
Taxable capital gain: $500
In this example, $500 would generally be included in taxable income. The actual amount of tax payable would depend on the taxpayer's broader tax situation.
The current one-half inclusion rate also applies to capital losses when calculating taxable capital gains under the existing rules.
What happened to the proposed capital gains tax increase?
The proposed capital gains changes involved several announcements, updates, and administrative adjustments.
Budget 2024 proposal
In Budget 2024, the federal government announced a proposal to increase the capital gains inclusion rate from one-half to two-thirds in certain situations.
The proposal would have applied:
To capital gains exceeding $250,000 annually for individuals
To all capital gains realized by corporations
To most capital gains realized by trusts
The proposed effective date was June 25, 2024.
2025 Deferral
In January 2025, the Department of Finance announced that the proposed implementation date would be deferred from June 25, 2024 to January 1, 2026. On March 21, 2025, the proposed capital gains tax increase was cancelled.
CRA administration update
Following the deferral announcement, the CRA stated that it had reverted to administering the currently enacted capital gains inclusion rate of one-half.
The CRA indicated that capital gains realized before January 1, 2026 would be subject to the enacted one-half inclusion rate unless an exemption applies.
As of the publication date of this article, the CRA's administration reflects the currently enacted one-half inclusion rate. Future legislative developments remain subject to the parliamentary process and official government announcements.
What is the current capital gains inclusion rate in Canada?
Current status
The CRA has reverted to administering the currently enacted one-half capital gains inclusion rate. (opens in a new tab) This generally means 50% of a capital gain is included in taxable income unless an exemption or special rule applies.
For most taxpayers, the current inclusion rate being administered remains one-half.
This means that:
A capital gain is calculated
One-half of the gain generally becomes a taxable capital gain
The taxable capital gain is included in taxable income
The Department of Finance Canada continues to describe the capital gains inclusion rate as the portion of capital gains included in income.
Special rules, exemptions, and exceptions may apply in some situations, including matters involving:
Small business shares
Fishing property
Certain business transactions
Other designated circumstances
Capital losses have separate rules and may offset taxable capital gains in accordance with applicable tax legislation.
How capital gains tax can apply to investments
Capital gains may be relevant when investments are sold for more than their adjusted cost base.
Examples of investments that may generate capital gains include:
Other capital property
When an investment is sold, the proceeds received may differ from the original purchase cost. Transaction costs and expenses may also affect the calculation.
Maintaining records can be important because adjusted cost base, commissions, legal fees, and other expenses incurred may influence the final gain or loss calculation.
Illustrative example
The following example is based on CRA methodology and is provided for educational purposes only.
Assume:
Proceeds of disposition: $6,500
Adjusted cost base: $4,000
Selling expenses: $60
Calculation:
$6,500 minus $4,000 minus $60
Capital gain: $2,440
Under a one-half inclusion rate:
Taxable capital gain: $1,220
The amount ultimately included in taxable income would generally be $1,220. Actual tax payable would depend on the individual's overall tax situation.
This example illustrates how proceeds, adjusted cost base, and eligible expenses can affect the calculation of capital gains.
Registered and non-registered accounts: why account type matters
Account type can affect how investment income and capital gains are treated for tax purposes.
While the same investment may be held in different types of accounts, the tax treatment can vary depending on whether the account is registered or non-registered.
Non-registered accounts
Capital gains are generally most relevant in non-registered accounts.
When capital property is sold for more than its adjusted cost base, a capital gain may be realized. If a gain occurs, a taxable capital gain may be included in taxable income based on the applicable capital gains inclusion rate.
Examples of investments commonly held in non-registered accounts include:
Stocks
ETFs
Mutual funds
Bonds
Other capital property
Recordkeeping may be important because adjusted cost base, commissions, legal fees, and other expenses incurred can affect the calculation of gains and losses.
Registered accounts
Registered accounts operate under different tax rules.
Examples may include:
Registered Retirement Savings Plans (opens in a new tab) (RRSPs)
Other registered plans
Depending on the account type, capital gains may not be reported in the same manner as gains realized in a taxable account.
Because each account has its own rules, the same investment could receive different tax treatment depending on where it is held.
Account type can affect how investment income, capital gains, withdrawals, and contributions are treated for tax purposes.
Common misconceptions about capital gains tax changes in Canada
Several misconceptions emerged following discussions about proposed capital gains tax changes.
Misconception 1: the inclusion rate is the same as the tax rate
The inclusion rate and tax rate are separate concepts.
The inclusion rate determines how much of a capital gain is included in taxable income.
The tax rate determines how taxable income may ultimately be taxed.
A one-half inclusion rate does not mean capital gains are taxed at 50%.
Misconception 2: the proposed increase is currently being administered by CRA
The proposed increase announced in Budget 2024 generated significant attention.
However, the CRA has stated that it reverted to administering the currently enacted one-half inclusion rate following the implementation deferral.
Current CRA administration reflects the enacted one-half inclusion rate unless an exemption or special rule applies.
Misconception 3: every investment gain is treated the same way
Different circumstances can produce different tax outcomes.
Factors that may affect treatment include:
Account type
Asset type
Ownership structure
Available exemptions
Individual circumstances
Different rules may apply to stocks, business assets, small business shares, principal residences, fishing property, and other capital assets.
Misconception 4: a capital gain exists before an investment is sold
In many situations, a capital gain is realized when capital property is disposed of.
Changes in market value alone do not necessarily create a realized capital gain.
Certain deemed disposition rules and special situations may apply under tax legislation.
Conclusion
Capital gains tax changes in Canada have attracted attention because of proposed legislation, implementation delays, and updates regarding CRA administration.
The current CRA administrative position reflects the enacted one-half capital gains inclusion rate, meaning that 50% of a capital gain may generally be included in taxable income unless an exemption or special rule applies.
Understanding how capital gains are calculated, what the inclusion rate represents, and how account type may affect tax treatment can provide useful context when evaluating tax-related information.
As tax legislation can evolve over time, official CRA and Department of Finance Canada resources remain important sources of current information regarding capital gains tax rules in Canada.
