How to Fill Out Schedule 3 Capital Gains in Canada
Published: Aug 17, 2026
Capital gains reporting can become part of a Canadian tax filing process when a taxpayer sells capital property during the tax year. This may include publicly traded shares, mutual funds, real estate, foreign investments, or other properties that increased in value before being sold or transferred.
Schedule 3 is the section of the income tax return commonly used to report capital gains or losses. The form organizes different property types into separate categories and helps calculate total capital gains, allowable capital losses, and taxable capital gains for the year.
Understanding how to fill out Schedule 3 capital gains in Canada may help taxpayers follow the reporting process more clearly. The calculations can involve proceeds of disposition, adjusted cost base, expenses incurred during the sale, and special rules connected to deemed disposition events or foreign currency transactions.
This guide explains the structure of Schedule 3, common reporting categories, and the information often used to report capital gains on a Canadian tax return.
What Is Schedule 3?
Schedule 3 is part of the Canadian income tax return used to report dispositions of capital property.
The form may include transactions involving:
Publicly-traded shares
Mutual funds
Real estate
Foreign investments
Personal use property
Listed personal property
Other properties
Schedule 3 generally calculates:
Capital gains
Capital loss amounts
Total capital gains
Allowable capital losses
Taxable capital gains
The totals from Schedule 3 may then flow into other areas of the tax return.
What Counts as Capital Property?
Capital property can include assets acquired for investment or long-term ownership purposes.
Examples may include:
Stocks and exchange-traded funds (ETFs)
Mutual funds
Rental properties
Cottages
Foreign investments
Cryptocurrency holdings in some situations
Certain collectibles
Land
When a taxpayer sells capital property during the tax year, a gain or loss may need to be calculated and reported.
The reporting treatment can depend on the property type and how the property was used.
Understanding Capital Gains and Capital Losses
A capital gain may occur when the proceeds of disposition exceed the adjusted cost base and selling expenses associated with the property.
A capital loss may occur when the selling price is lower than the adjusted cost base after allowable expenses are considered.
The basic calculation can often follow this structure:
Proceeds of disposition
Minus adjusted cost base
Minus expenses incurred to sell the property
Equals capital gain or capital loss
Only a portion of the gain may become taxable capital gains based on the inclusion rate that applies during the tax year.
What Are Proceeds of Disposition?
Proceeds of disposition generally refer to the amount received or considered received when capital property is sold or transferred.
This amount may include:
Selling price
Fair market value in some deemed disposition situations
Insurance proceeds
Compensation payments connected to property transfers
For publicly traded shares or mutual funds, the proceeds of disposition may typically reflect the sale amount before fees are deducted.
For real estate transactions, the proceeds may often reflect the final selling price of the property.
Understanding Adjusted Cost Base
Adjusted cost base is commonly used to calculate a gain or loss when capital property is sold.
The adjusted cost base may include:
Original purchase price
Commissions and transaction costs
Certain acquisition-related legal fees
Adjustments for reinvested distributions
Capital improvements in some situations
The adjusted cost base can change over time depending on the type of property and transactions associated with it.
Accurate cost base calculations may help support more accurate capital gains reporting on Schedule 3.
Expenses Incurred During a Sale
Certain expenses incurred to sell capital property may reduce the capital gain calculation.
Examples may include:
Brokerage commissions
Legal fees
Real estate commissions
Advertising costs connected to property sales
Transfer fees
The treatment of expenses can vary depending on the property type.
Keeping records connected to these expenses may help support calculations included on the tax return.
Understanding the Inclusion Rate
The inclusion rate determines how much of a capital gain becomes taxable capital gains for Canadian tax purposes.
For example:
A capital gain may first be calculated
The inclusion rate may then determine the taxable portion
The taxable amount may flow into taxable income on the tax return
The applicable inclusion rate can depend on tax rules in effect during the tax year.
Allowable capital losses may generally use the same inclusion rate principles when offsetting gains.
Main Sections of Schedule 3
Schedule 3 is organized by property type.
Common sections may include:
Publicly-traded shares, mutual funds, and other securities
Real estate and depreciable property
Bonds and debt obligations
Personal use property
Listed personal property
Other properties
Each section may require:
Description of the property
Year of acquisition
Proceeds of disposition
Adjusted cost base
Outlays and expenses
Resulting gain or loss
Reporting: Publicly Traded Shares and Mutual Funds
Publicly traded shares and mutual fund units are among the most commonly reported capital property transactions.
Information Often Included
Taxpayers may report:
Name or description of the security
Purchase price
Selling price
Adjusted cost base
Commissions paid
Gain or loss
Brokerage statements may provide some of this information, although adjusted cost base tracking may sometimes require separate calculations.
Mutual Fund Units and Reinvested Distributions
Mutual fund units can involve additional cost base adjustments when distributions are reinvested.
Reinvested amounts may increase the adjusted cost base over time, which could affect future capital gains or losses.
Reporting Real Estate on Schedule 3
Real estate transactions may also appear on Schedule 3.
This can include:
Rental properties
Vacation properties
Land
Foreign real estate
Principal residence transactions in some situations
Principal Residence Reporting
Even where a principal residence exemption may apply, certain reporting obligations may still exist on the tax return.
The reporting may include:
Year acquired
Proceeds of disposition
Description of the property
Additional forms may also apply depending on the circumstances.
Rental and Investment Properties
When investment real estate or rental property is sold, taxpayers may generally report:
Selling price
Legal fees
Real estate commissions
Adjusted cost base
Capital improvements
Depreciable property may also involve additional tax considerations separate from standard capital gains calculations.
Reporting Other Properties
Schedule 3 may also include other properties that do not fall into standard investment categories.
Examples can include:
Private company shares
Collectibles
Foreign assets
Business property
Certain partnership interests
The reporting requirements can vary depending on the property type and transaction details.
Personal Use Property and Listed Personal Property
Some personal items may receive special treatment for capital gains purposes.
Personal Use Property
Personal use property can include items primarily used for personal enjoyment.
Examples may include:
Boats
Furniture
Electronics
Vehicles
Recreational equipment
Capital losses on personal use property may not always be deductible.
Listed Personal Property
Listed personal property generally refers to certain collectible items such as:
Artwork
Rare books
Coins
Stamps
Capital gains or losses from listed personal property may follow separate calculation rules.
Understanding Deemed Disposition Rules
A deemed disposition can occur even when no actual sale takes place.
Under deemed disposition rules, a taxpayer may be treated as though the property was sold at fair market value.
Situations that could involve deemed disposition may include:
Emigration from Canada
Certain gifts or transfers
Death of a taxpayer
Some trust-related events
The deemed proceeds may become part of Schedule 3 reporting during the tax year.
Fair Market Value and Deemed Proceeds
Fair market value is commonly used when calculating deemed proceeds during a deemed disposition event.
The fair market value may represent the estimated value of the property at the time of transfer or deemed sale.
The resulting gain or loss may then be calculated using:
Fair market value
Adjusted cost base
Expenses incurred where applicable
Supporting documents or valuations may help support fair market value calculations.
Reporting Foreign Investments and Foreign Currency Transactions
Foreign investments may also create capital gains or losses for Canadian tax purposes.
Examples can include:
Foreign stocks
Foreign mutual funds
International ETFs
Foreign real estate
Converting Amounts Into Canadian Dollars
Transactions involving foreign currency may generally need to be converted into Canadian dollars.
The exchange rate used may depend on:
Date of purchase
Date of sale
Nature of the transaction
Both the purchase price and selling price may require separate exchange rate calculations.
Currency fluctuations alone may sometimes contribute to a gain or loss calculation.
Step-by-Step Example of a Capital Gain Calculation
A simplified Schedule 3 example may help illustrate the process.
Example Scenario
A taxpayer:
Purchased publicly traded shares for $8,000
Paid $100 in brokerage commissions
Later sold the shares for $12,000
Paid $150 in selling commissions
Calculation
Item | Amount |
Proceeds of disposition | $12,000 |
Adjusted cost base | $8,100 |
Selling expenses | $150 |
Capital gain | $3,750 |
The inclusion rate for the tax year may then determine the taxable capital gains amount reported on the tax return.
Net Capital Losses
When total allowable capital losses exceed taxable capital gains during the tax year, a net capital loss may result.
A net capital loss may sometimes be:
Applied against taxable capital gains from the three preceding years
Carried forward to any future year indefinitely
To apply a net capital loss to a prior year, taxpayers generally use Form T1A (Request for Loss Carryback). When carrying losses forward, they are applied in the year the taxpayer has sufficient capital gains to offset.
The use of net capital loss amounts can depend on applicable tax rules and available gains.
Special Considerations for Common-Law Partners and Spouses
Transfers between spouses or a common-law partner may involve separate capital gains rules.
Some transfers may occur at adjusted cost base rather than fair market value under the spousal rollover rules, while other transactions may trigger immediate reporting obligations. Taxpayers may elect out of the spousal rollover in certain situations, which would cause the transfer to occur at fair market value instead. The decision to elect out can have meaningful tax planning implications and is worth discussing with a tax professional.
The reporting treatment can depend on:
The nature of the transfer
Whether an election applies
The property type involved
In some situations, the Attribution Rules may also apply, causing income or gains from transferred property to be attributed back to the transferor spouse for tax purposes.
Depreciable Property and Capital Gains
Depreciable property can involve different tax calculations compared with non-depreciable capital property.
Examples may include:
Rental buildings
Commercial structures
Equipment used to earn income
When depreciable property is sold, the transaction may involve:
Capital gains
Recapture of depreciation
Terminal loss calculations
Unlike non-depreciable capital property, depreciable property cannot result in a capital loss. If the proceeds from the sale are less than the property's undepreciated capital cost (UCC), the shortfall is treated as a terminal loss rather than a capital loss.
These amounts may appear in different sections of the tax return depending on the circumstances.
Capital gains on the sale of depreciable property are generally reported on Schedule 3. However, recapture of Capital Cost Allowance (CCA) and terminal losses are typically reported on other forms, such as Form T776 for rental properties or Form T2125 for business properties, rather than on Schedule 3 itself.
Common Reporting Mistakes on Schedule 3
Several common issues may arise when taxpayers report capital gains or losses.
Incorrect Adjusted Cost Base
Missing reinvested distributions or commissions may affect cost base calculations.
Missing Expenses
Legal fees and brokerage commissions may sometimes be overlooked when calculating gain or loss amounts.
Incorrect Exchange Rate Use
Foreign currency transactions may require separate conversion calculations for purchase and sale dates.
Missing Deemed Disposition Events
Some taxpayers may not realize that certain transfers or life events could trigger deemed disposition reporting requirements.
Reporting Gross Instead of Net Proceeds
Brokerage statements may show transaction values differently depending on fees and commissions.
To avoid this error, taxpayers should confirm whether the proceeds shown on their brokerage statement or T5008 slip are gross (before fees) or net (after fees), and adjust their Schedule 3 calculations accordingly.
Key Takeaways on Filling Out Schedule 3 Capital Gains in Canada
Schedule 3 can play an important role in reporting capital gains or losses on a Canadian tax return. The form may apply to transactions involving publicly traded shares, mutual funds, real estate, foreign investments, and other capital property sold during the tax year. Completing the form often involves calculating proceeds of disposition, adjusted cost base, expenses incurred, and the resulting gain or loss. Taxable capital gains may also depend on the applicable inclusion rate and any available net capital loss balances from preceding years. Because reporting requirements can vary by property type and transaction details, taxpayers often review records carefully before filing Schedule 3.
