Canada's Capital Gains Inclusion Rate in 2026: Is It Still One-Half?

If you have sold shares, a rental property or a cottage, you may have heard that Canada was going to tax more of your capital gains. News about a two-thirds inclusion rate was loud for a while, and then it went quiet. It is fair to wonder which rate actually applies to your sale.

This article explains where the rate stands for 2026, what happened to the proposed increase, how the CRA unwound it, and how the one-half rate works in a simple example. It is general information, not advice on your own return.

This article covers Canadian federal tax law, which applies in every province.

The short answer: one-half still applies

Under the Income Tax Act, the taxable capital gain for a year is one-half of the capital gain, and the allowable capital loss is one-half of the capital loss. The CRA says it has reverted to administering the enacted one-half rate.

Because the increase never took effect, the one-half rate applies to gains realized in 2024, 2025 and 2026. Any exemption that applies to your situation, such as the principal residence exemption, is a separate question.

What happened to the two-thirds proposal

The 2024 proposal would have raised the inclusion rate from one-half to two-thirds. It would have applied to individuals only on annual gains above $250,000, and to corporations and most trusts on all gains. It was first set for June 25, 2024, then deferred to dispositions on or after January 1, 2026.

The Government of Canada announced the deferral to January 1, 2026 on January 31, 2025. The increase was later cancelled. Finance Canada says the government confirmed in Budget 2025 that it would not proceed with the changes, including for corporations. The CRA's corporations page also says the proposed increase was cancelled.

How the CRA undid the change

Some filers had already acted on the earlier proposal. The CRA reversed the two-thirds rate for corporations that had filed on the September 2024 basis, using corrective reassessments. It also gave late-filing penalty and interest relief to T1 and T3 filers.

If you filed in a way that assumed a higher rate, or delayed filing because of the uncertainty, it is worth checking your notice of assessment and talking to an accountant about whether anything remains to be corrected.

One exception: the Lifetime Capital Gains Exemption

Not every part of the 2024 package was cancelled. The increase of the Lifetime Capital Gains Exemption limit to $1.25 million of eligible capital gains for dispositions after June 24, 2024 was confirmed in Budget 2025, and indexation resumes in 2026. The January 2025 announcement had also said this increase was not affected by the deferral.

Because the exemption relies on enacting legislation, check that it has passed before relying on the higher figure. The exemption applies only to qualified small business corporation shares and qualified farm or fishing property, and it can be reduced by earlier claims and by cumulative net investment loss.

How the one-half rate works in practice

To find a gain, subtract the property's adjusted cost base and the costs of selling from the proceeds. The CRA's example is 400 shares sold for $6,500, with a $60 commission and a $4,000 adjusted cost base. The gain is $2,440, and half of it, $1,220, is the taxable capital gain reported on line 12700.

• Proceeds of disposition: $6,500
• Less commission: $60 and adjusted cost base: $4,000
• Capital gain: $2,440
• Taxable capital gain at one-half: $1,220

That $1,220 is not taxed at a special flat rate. It is added to your other income and taxed at your marginal rates. Allowable capital losses are also one-half of the loss.

What to do next

• Confirm the year you sold the property, since you report a disposition in the calendar year of the sale.
• Gather the purchase cost, selling costs and proceeds so you can calculate the gain.
• File a return even if no tax is owing.
• Check the current rate again before filing, because a future budget could change it.
• Ask an accountant or lawyer if you filed on a higher-rate basis or have a large or unusual sale.

Frequently asked questions