How are capital gains on publicly traded shares taxed in Ontario?

When you sell publicly traded shares at a profit, the gain is a capital gain under federal income tax rules. The taxable portion is added to your income and taxed at your personal marginal rate. Ontario residents pay both federal and provincial income tax, so your combined marginal rate on the included gain can be material at higher income levels.

Your capital gain is calculated as the proceeds of disposition minus the adjusted cost base (ACB) minus any brokerage commissions. The ACB for shares is generally your average cost, including any reinvested dividends that were previously included in your income. Tracking ACB carefully is your responsibility — brokers are not required to report it to the CRA accurately, and errors are common when shares were acquired in multiple lots over many years.

Capital gains realized inside a registered account such as an RRSP or TFSA are not taxable while the funds remain in the account. Gains inside a TFSA are tax-free permanently, while gains inside an RRSP are deferred until withdrawal.