How are capital gains taxed in Ontario for individuals?

Capital gains arise when you sell a capital property — such as stocks, a rental property, or a vacation home — for more than you paid for it. In Canada, only a portion of a capital gain is included in your taxable income; this is called the inclusion rate and is set by federal law. Ontario then applies its provincial tax to the same included amount.

Under the longstanding rule, one-half of a capital gain was included in income. Federal legislation has proposed increasing the inclusion rate for gains above a threshold, but any change must be confirmed in law. Because this area is actively evolving, rely on current CRA guidance or professional advice rather than a fixed figure.

After the inclusion rate is applied, the resulting "taxable capital gain" is added to your other income and taxed at your marginal rate — both federal and Ontario provincial. There is no separate capital gains tax rate in Ontario; the gain is taxed as ordinary income at whatever bracket you fall into. The principal residence exemption can shelter gains on your qualifying home entirely, which is an important planning tool for homeowners.