Capital Gains Rate 2026: Still 50% in Canada — ClearWealth

This article is for informational purposes only and does not constitute tax or financial advice. Consult a qualified accounting professional before making any tax or financial decisions.

Quick Answer

Why This Matters Right Now

If you spent 2024 or early 2025 rearranging investments, accelerating an asset sale, or booking extra time with your accountant to prepare for a capital gains tax hike, this article confirms what you probably already suspect: the hike never happened. The proposed jump from a one-half inclusion rate to two-thirds was deferred, then cancelled outright before it ever took effect.

For 2026, planning can rest on a settled rule. Every dollar of capital gain, whether it comes from selling a stock, a rental property, or shares in your own corporation, is included at 50 percent. Nothing changes above $250,000. Nothing changes if you file through a corporation or a trust. The Lifetime Capital Gains Exemption survived the noise and is now higher than it was two years ago.

The rest of this guide explains exactly how the 50 percent rate applies to you, what to do if you already restructured, and where the real planning levers still sit. Read our earlier walkthrough on the capital gains tax overhaul for the full backstory.

What Actually Changed and What Didn’t

Three dates capture the whole story. In April 2024, Budget 2024 proposed lifting the inclusion rate to two-thirds on individual gains above $250,000 and on all corporate and trust gains, effective June 25, 2024. In January 2025, the Department of Finance deferred the effective date to January 1, 2026. Then on March 21, 2025, the federal government cancelled the increase entirely. Budget 2025 formally accounted for the reversal.

Two things stayed. The Lifetime Capital Gains Exemption base rose to $1.25 million for dispositions on or after June 25, 2024, and is $1,275,000 for 2026 after annual indexing. What did not survive: the 66.67 percent rate, the $250,000 individual threshold, and the two-tier calculation. See our summary of Finance’s latest guidance on capital gains for the underlying analysis.

Quick Start: Pick Your Path

Different filers face different steps under the 50 percent rate. Use this checklist to jump to the guidance that fits you.

Review our tax services for Ontario individuals and businesses if you are not sure which category applies to you.

How Capital Gains Tax Works Under the 50 Percent Rate

A capital gain arises when you sell or are deemed to sell a capital property for more than its adjusted cost base. Adjusted cost base, or ACB, is generally what you paid for the property plus certain purchase costs, adjusted over time for events like reinvested distributions or return-of-capital payments.

The 2026 calculation follows five steps.

1. 1
   Determine proceeds of dispositionThis is what you received for the property, including cash and the fair market value of anything else exchanged.
2. 2
   Subtract the adjusted cost baseACB is generally what you paid, plus purchase costs, adjusted for reinvested distributions or return-of-capital amounts over time.
3. 3
   Subtract outlays and expensesDeduct costs directly tied to the sale, such as legal fees, real estate commissions, and broker charges.
4. 4
   Apply the 50 percent inclusion rateUnder paragraph 38(a) of the Income Tax Act, half of the gain is taxable. This is enacted law and has been since October 2000.
5. 5
   Add to income and tax at your marginal rateIndividuals report on Schedule 3 of the T1 return. Corporations use Schedule 6 of the T2. Trusts report on the T3 return.

Our Canadian tax guide for investors walks through the arithmetic with worked examples.

Individuals, Corporations, and Trusts: Side-by-Side

The 50 percent inclusion rate applies uniformly across all three filer types in 2026. What differs is the reporting form, the exemptions available, and whether the non-taxable half can be distributed tax-free.

An individual filer applies 50 percent inclusion on Schedule 3 of the T1 return. Available shelters include the Principal Residence Exemption on a qualifying home, the Lifetime Capital Gains Exemption on qualified small business corporation shares, and the multi-year capital gains reserve when payment is spread over time.

A Canadian-controlled private corporation applies 50 percent inclusion on Schedule 6 of the T2 return. The corporation pays tax on the taxable half, and the non-taxable half is added to its Capital Dividend Account. Balances in the CDA can be distributed as tax-free capital dividends to Canadian shareholders by filing Form T2054 and passing a corporate resolution.

Non-resident sellers of taxable Canadian property, such as an Ontario rental, are also taxed at 50 percent inclusion and must obtain a section 116 certificate of compliance from CRA before closing. Our overview of Canada’s corporate tax rates explained covers CCPC treatment in more depth.

Owner-Manager Playbook: LCGE, CDA, and Timing

Three planning levers matter more in 2026 than the rate itself.

The Lifetime Capital Gains Exemption shelters up to $1,275,000 of gain per individual on a qualifying share sale. To qualify, the shares must generally meet the QSBC test at the time of sale, be held for at least 24 months, and represent an interest in an active Canadian business. Family members who also hold qualifying shares can multiply the exemption across the household, subject to specific attribution rules.

The Capital Dividend Account preserves the tax-free character of the non-taxable half of any corporate gain. When your CCPC realizes a $500,000 gain, $250,000 is taxable at the corporate rate and $250,000 flows into the CDA. Filing Form T2054 lets you distribute that balance to Canadian shareholders as a tax-free capital dividend.

The five-year capital gains reserve lets you spread recognition of a gain across up to five tax years when payment from the buyer is deferred, matching your tax bill to the cash you actually receive. Our guide to holding company tax savings for 2026 covers how these pieces fit together.

Common Mistakes to Avoid in 2026

Six recurring errors show up on files we review each spring.

• →Assuming the cancelled 66.67 percent rate still applies and either overpaying tax on a 2026 disposition or delaying a sale that no longer needs to be delayed. The rate is 50 percent for every filer.
• →Selling a losing security to book a capital loss and repurchasing the same holding inside 30 days, which triggers the superficial loss rule under section 54 of the Income Tax Act and denies the loss.
• →Forgetting to report the sale of a principal residence on Schedule 3 and Form T2091. Even where the gain is fully exempt, the disposition must be reported or the exemption can be denied by CRA.
• →Miscalculating adjusted cost base after years of reinvested distributions in a non-registered account, which usually inflates the reported gain and the resulting tax bill.
• →Distributing the taxable half of a corporate gain to shareholders instead of routing the non-taxable half through the Capital Dividend Account with Form T2054.
• →Skipping the section 116 clearance certificate on a sale by a non-resident, which can leave the buyer liable for withholding tax on the closing amount.

Our guide to real estate investment tax savings explores each mistake in more detail.

Frequently Asked Questions

Browse more explainers in our Insights library.

This article is for informational purposes only and does not constitute tax or financial advice. Consult a qualified accounting professional before making any tax or financial decisions.

Sources & References

1. Department of Finance Canada — Deferral of the capital gains inclusion rate (Jan 31, 2025) — https://www.canada.ca/en/department-finance/news/2025/01/government-of-canada-announces-deferral-in-implementation-of-change-to-capital-gains-inclusion-rate.html
2. Prime Minister of Canada — Cancellation of proposed capital gains tax increase (Mar 21, 2025) — https://www.pm.gc.ca/
3. Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) — paragraph 38(a) and section 54 — https://laws-lois.justice.gc.ca/eng/acts/i-3.3/
4. Canada Revenue Agency — Schedule 3 (Capital Gains or Losses) — https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/5000-s3.html
5. Canada Revenue Agency — T2 Corporation Income Tax Guide — https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4012.html
6. Canada Revenue Agency — Form T2054 Election for a Capital Dividend — https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2054.html
7. Canada Revenue Agency — Principal Residence Exemption and Form T2091 — https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12700-capital-gains/principal-residence-other-real-estate.html
8. Canada Revenue Agency — Lifetime Capital Gains Exemption limits — https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-25400-capital-gains-deduction.html
9. Ontario Ministry of Finance — Personal Income Tax — https://www.ontario.ca/page/personal-income-tax
10. CPA Canada — Capital gains tax analysis and updates — https://www.cpacanada.ca/