Capital Gains Tax in Canada 2026: The 50% Inclusion Rate Explained

What changed in the proposal?

On March 21, 2025, the government announced it would cancel the proposed capital gains inclusion-rate increase. Earlier announcements describing a deferral or a future two-thirds rate should not be read as the current rule. See the official cancellation announcement.

The general rule in section 38 of the Income Tax Act includes one-half of a taxpayer's capital gain. This applies generally to individuals, corporations and trusts, subject to the Act's specific exceptions. It does not make their final tax bills the same: the taxpayer and the surrounding tax rules still matter.

Separate four different numbers

Sale proceeds are the amount received for the property. The capital gain is generally the proceeds minus the adjusted cost base and eligible selling expenses. The taxable capital gain is the included portion. Tax payable is the result of the full tax calculation. The CRA explains these steps in its capital gains calculation guidance.

For example, suppose an investment sells for $220,000, its adjusted cost base is $115,000, and eligible selling expenses are $5,000. The gain is $100,000. Under the general 50% inclusion rule, the taxable capital gain is $50,000. Treating the full $220,000 as the gain would overstate the result; treating $50,000 as the tax bill would answer a different question.

Worked examples: $100,000, $500,000 and $1 million gains

These are arithmetic illustrations of the general inclusion rule. They assume the amount in the first column is already the capital gain, not the selling price. They exclude capital losses, exemptions, deductions and transaction-specific adjustments.

There is no extra calculation for a portion above $250,000 in this general-rule illustration. A $500,000 gain is twice a $250,000 gain, so its included amount is also twice as large. Whether its actual tax cost is twice as large cannot be determined from those two figures alone.

Estimate the tax separately

As a deliberately simplified example, if all $50,000 of additional taxable income faced a hypothetical combined marginal rate of 40%, its incremental income tax would be $20,000. That is 20% of the original $100,000 gain. The 40% is an assumption for this example, not a quoted provincial rate or a forecast for your return. A real calculation can cross tax brackets and interact with credits, benefits, deductions and alternative minimum tax.

Before using an estimate to decide how much sale money to set aside, specify the owner of the property, province of residence, other income, available losses and any claimed exemption. Two people selling the same investment for the same gain can have different final outcomes.

Exemptions, losses and reporting need their own check

The CRA capital gains guide explains principal residence reporting, capital losses, qualifying business or farm-property deductions and special transactions. Its currently available annual edition is for 2025; check the relevant tax-year forms when filing a 2026 return. Do not assume a sale is exempt just because it involves a home, inherited property or a business you own.

Keep purchase and sale records, adjusted-cost-base calculations and eligible expense receipts. A change in use, depreciable property, a corporate sale or a transfer involving relatives may need a more detailed analysis than this general example. Discuss those facts with a qualified tax professional before relying on a projected bill.

Educational information only, not individualized tax or financial advice. Sources checked September 21, 2026.