Is the Capital Gains Inclusion Rate Still One-Half in 2026 in Canada?

You may have heard that the tax on capital gains was going up in 2024, then 2026. If you sold property, shares or a business recently, or plan to, you probably want to know which rate applies to your gain.

This article walks through what was proposed, what happened, and what it means for gains realized in 2024, 2025 and 2026. It also covers what the CRA did for people who had already filed on the higher basis.

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

What rate applies to your gain now

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 that one-half rate.

Because the proposed increase never took effect, the one-half inclusion rate applies to gains realized in 2024, 2025 and 2026. That rate is subject to any exemption that applies to your situation. If you sold, or are considered to have sold, your principal residence or part of it, you include Form T2091(IND) with your return and report the sale on Schedule 3.

The timeline of 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, including for corporations.
• The CRA's corporations page also states that the proposed increase was cancelled.

The proposed increase in the inclusion rate was cancelled, so under the Income Tax Act the taxable capital gain is still one-half of the capital gain.

What the CRA did for people who filed on the higher basis

Some filers had reported gains on the two-thirds basis before the cancellation. The CRA reversed the two-thirds rate for corporations that had filed on the September 2024 basis through corrective reassessments. It also gave late-filing penalty and interest relief to T1 and T3 filers.

If you think you reported a gain at the wrong rate and have not seen a correction, a tax professional can help you confirm your situation.

How the one-half rate works, with the CRA's share example

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

If taxable capital gains exceed allowable capital losses, the difference goes on line 12700 of the T1 return. It is added to your other income and taxed at your marginal rates, so it is not a separate flat tax.

The lifetime exemption and what to do next

One part of the 2024 package was not cancelled. Budget 2025 confirmed the increase of the Lifetime Capital Gains Exemption limit to $1.25 million of eligible capital gains for dispositions after June 24, 2024, and indexation resumes in 2026. It applies only to qualified small business corporation shares and qualified farm or fishing property, and the deduction may be reduced by earlier claims and by cumulative net investment loss.

• Confirm the year in which your sale or deemed sale occurred, since you report it in that calendar year.
• Gather the proceeds, adjusted cost base and selling costs for each property.
• Check whether any exemption, such as the lifetime exemption, may apply to you.
• Re-check the current rate before you file, in case a later budget changes it.
• Confirm whether the legislation for the lifetime exemption increase has been enacted.
• Speak with a lawyer or accountant if your sale is large or complex.

Frequently asked questions