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

If you sold a property, shares or crypto-assets in the last few years, you may remember headlines about the capital gains inclusion rate going up to two-thirds. The proposal was announced, delayed and then dropped, which left many people unsure which rate applies to their own gains.

This article explains the rate that applies in Canada for 2024, 2025 and 2026, how the proposal unfolded, what the Canada Revenue Agency (CRA) did afterwards, and the one part of the proposal that was kept. 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 from a disposition of property is one-half of the capital gain. The allowable capital loss is likewise one-half of the capital loss. That is the inclusion rate in force.

The CRA says it has reverted to administering the currently enacted rate of one-half, so gains realized before 2026 are taxed at that rate, subject to any exemption that applies. Because the increase never took effect, the one-half rate applies to gains realized in 2024, 2025 and 2026.

An inclusion rate is not a tax rate. It decides how much of your gain is added to your income. The tax you pay depends on your other income and your marginal rates.

How the two-thirds proposal unfolded

The 2024 proposal would have raised the inclusion rate from one-half to two-thirds. It would have applied to individuals on annual gains above $250,000, and to corporations and most trusts on all gains.

• The increase was first set to start on June 25, 2024.
• It was then deferred to dispositions on or after January 1, 2026.
• The Government of Canada announced that deferral on January 31, 2025.
• The increase was later cancelled. Finance Canada says the government confirmed in Budget 2025 that it would not proceed with these changes, including for corporations.

The CRA's own corporations page describes the same sequence: postponed under the January 31, 2025 announcement, and then later announced as cancelled.

What the CRA did after the cancellation

Some taxpayers had already filed on the assumption that the higher rate would apply. 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 a return that reflected a higher inclusion rate, or you delayed filing while the rules were unclear, check your notice of assessment and the CRA's current guidance. A tax professional can confirm whether anything on your file still needs attention.

The exception: the Lifetime Capital Gains Exemption increase stayed

Not every part of the 2024 proposal was dropped. The deferral announcement said the increase in the Lifetime Capital Gains Exemption (LCGE) to $1.25 million was not affected. Budget 2025 confirmed the increase of the limit to $1.25 million of eligible capital gains for dispositions after June 24, 2024, and indexation resumes in 2026.

For 2025 the CRA shows the exemption as $1,250,000, which is a maximum deduction of $625,000 at the one-half rate. The deduction is claimed on line 25400 using Form T657, and a claimant must generally be resident throughout the year.

The exemption is narrow. It applies only to qualified small business corporation shares and qualified farm or fishing property, and the deduction may be reduced by cumulative net investment loss and by earlier exemption claims. Because the CRA describes the $1.25 million figure in terms of proposed changes, it is sensible to confirm that the enacting legislation has passed before you rely on it for a sale.

A worked example from the CRA

To calculate a gain, subtract the adjusted cost base (ACB) and the outlays and expenses of selling from the proceeds of disposition. The CRA's example involves 400 shares sold for $6,500, with a $60 commission and a $4,000 ACB. The gain is $2,440, and half of it, $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. It is added to your other income and taxed at your marginal rates, so it is not a separate flat tax. Net capital losses can be applied only against taxable capital gains.

What to do next

• List every disposition you made in the year, including deemed sales such as gifts of capital property, and report each in the calendar year it occurred.
• Gather the proceeds, ACB and selling costs for each one, and record them on Schedule 3.
• File a return even if no tax is owing.
• Use the one-half rate when estimating tax on gains realized in 2024, 2025 and 2026.
• If you may qualify for the LCGE, collect your Form T657 information and confirm the current legislation first.
• Re-check the rate before you file or sell, in case a future federal budget changes it.

If your situation involves a business sale, a family transfer, a prior filing on the two-thirds basis, or a large gain, a lawyer or accountant can review the facts before you act.

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