Capital gains tax in Canada for 2026: the inclusion rate, how to calculate it and how to shelter gains
Searches for "capital gains tax Canada 2026" are full of conflicting claims, mostly because a higher inclusion rate was proposed in 2024 and then dropped. Here is what the government and the CRA actually say, how to work out a gain step by step, which sales are exempt, and how registered accounts keep gains out of your tax return, with a worked example.
On this page
Where the inclusion rate stands
Only part of a capital gain is taxed. That part is the taxable capital gain, and the fraction is the inclusion rate. Here is the sequence, using only government sources:
| Date | What happened | Source |
|---|---|---|
| 2024 | An increase to the inclusion rate was proposed | Referred to as the "proposed hike" in the March 2025 announcement |
| March 21, 2025 | The government said it would "cancel the proposed hike in the capital gains inclusion rate" | Prime Minister's Office |
| 2025 tax year | The CRA capital gains guide says the inclusion rate is 1/2 and uses "Fifty percent of the capital gain would be taxable" in its example | CRA |
The same March 2025 announcement said the government would keep the Lifetime Capital Gains Exemption increase to $1,250,000 for qualifying small business shares and farming and fishing property, with legislation "in due course." We did not find any CRA or Finance Canada page that sets a rate other than one-half for individuals. The CRA guide text still includes a stray reference to 2024 in one sentence, so for any large sale check the current page or ask a tax professional before you file.
So for planning a 2026 sale, the verified starting point is: 50% of the gain is taxable. If that changes, this page will be updated.
How to calculate a capital gain
The CRA says a capital gain happens when you sell, or are considered to have sold, a capital property for more than its adjusted cost base (ACB) plus the outlays and expenses of selling. The steps:
- Proceeds of disposition: what you sold it for.
- Subtract the ACB: generally what you paid, including commissions and some costs of buying.
- Subtract outlays and expenses of selling: for example, a broker commission or real estate fees.
- Result: your capital gain (or loss).
- Multiply by the inclusion rate (50%): your taxable capital gain.
- Add it to your income: it is taxed at your usual marginal rates, so the effective tax on the gain is half your marginal rate.
You report the sale on Schedule 3 with your return, and the taxable amount goes on line 12700. The CRA example: a property sold for $6,500 with an ACB of $4,000 and a $60 commission gives a $2,440 gain, of which $1,220 is taxable.
Worked example
Dana sells shares held in a non-registered account in 2026. The tax rate is an assumed 30% marginal rate for illustration only. Your own rate depends on your province and total income.
| Step | Arithmetic | Amount |
|---|---|---|
| Proceeds of disposition | $30,000 | |
| Adjusted cost base | - $18,000 | |
| Selling commission | - $75 | |
| Capital gain | $30,000 - $18,000 - $75 | $11,925 |
| Taxable capital gain (50%) | $11,925 x 0.50 | $5,962.50 |
| Tax at an assumed 30% marginal rate | $5,962.50 x 0.30 | $1,788.75 |
| Tax as a share of the gain | $1,788.75 / $11,925 | 15% |
Now suppose Dana also sold another investment in 2026 at a $2,000 capital loss. The net gain becomes $11,925 - $2,000 = $9,925, the taxable amount is $4,962.50, and tax at 30% is $1,488.75, which is $300 less. The loss is worth the same 50% treatment as the gain.
The same sale inside a TFSA would produce no tax and nothing to report as income.
Capital losses
Per the CRA: a capital loss generally offsets capital gains in the same year. If losses exceed gains, the excess is a net capital loss that you can apply to taxable capital gains of the three preceding years or carry forward indefinitely. A few traps:
- Superficial loss: a loss is denied if you or an affiliated person buys the same or identical property in the period from 30 days before to 30 days after the sale and still owns it afterwards. The denied amount is generally added to the ACB of the replacement property.
- Personal-use property: the CRA table shows no loss allowed on most personal-use property, such as a car for personal use.
- Losses only offset taxable capital gains, not other income.
Principal residence exemption
The CRA says that if a property was solely your principal residence for every year you owned it, you do not pay tax on the gain. The details that trip people up:
- You must report it. Since 2016 the CRA allows the exemption only if you report the sale and the designation on your return, using Schedule 3 and Form T2091(IND). A late designation may bring a penalty.
- One home per family per year. You can designate only one home as your family's principal residence for each year.
- Lot size. The land counted as part of the residence is generally limited to half a hectare, with more allowed if you can show you need it.
- Someone must live there. You, your current or former spouse or common-law partner, or your children lived in it at some time during the year.
- The "plus 1" rule helps when you sell one home and buy another in the same year.
- Flipping. A gain on a housing unit owned for less than 365 consecutive days is generally treated as business income, not a capital gain, with exceptions for life events such as death, relocation or disability.
A rental, cottage or second property can have a taxable gain even if you use it sometimes. If you are saving for your first home, the FHSA is built for it, and our first-time buyer programs page lists the rest.
Sheltering gains: TFSA and RRSP
| Account | Gains inside | Money out | 2026 limit |
|---|---|---|---|
| TFSA | "Any income you earn through interest, dividends or capital gains are generally tax-free" (CRA) | "You can withdraw funds tax-free when you want" (CRA) | $7,000 |
| RRSP | "Usually exempt from tax as long as the funds remain in the plan" (CRA) | "You generally have to pay tax when you receive payments from the plan" (CRA) | $33,810 dollar limit |
The limits are the CRA's published 2026 figures: $7,000 for the TFSA and a $33,810 RRSP dollar limit (the most you can add for the year, before your own earned-income limit and unused room). Two warnings on the TFSA: trading with the frequency and experience of a professional can lead the CRA to treat the income as business income, and going over your room triggers penalties (see the over-contribution penalty). Not sure which to fund first? Compare RRSP vs TFSA, read the RRSP guide and check the contribution deadline.
Keep in mind the different tax outcomes: a gain in a TFSA is never taxed, a gain in an RRSP is taxed as ordinary income when you take it out (not as a capital gain at 50%), and a gain in a non-registered account is taxed at the 50% rate when you sell. Interest is different again: read whether HISA interest is taxable.
Common mistakes
- Forgetting the ACB. Without your purchase records you may report the whole sale price as gain. Keep trade confirmations.
- Not reporting a home sale. Even a fully exempt sale must be reported and designated.
- Triggering a superficial loss by rebuying within 30 days.
- Assuming a side business is a capital gain. Frequent buying and selling or quick flips can be taxed as business income. See side hustle taxes.
- Quoting the old proposal. Calculations that use a higher inclusion rate are based on a proposal the government cancelled.
More calculators and checklists are on our tools page.
How to calculate your capital gain
- Write down the proceeds of disposition from the sale.
- Find your adjusted cost base, including commissions and other eligible purchase costs.
- Subtract the ACB and your selling costs from the proceeds to get the capital gain or loss.
- Apply this year's capital losses and any net capital loss carried forward to reduce the gain.
- Multiply the net gain by the 50% inclusion rate to get the taxable capital gain.
- Report it on Schedule 3, add the taxable amount to your income and apply your marginal rate.
Questions people ask
What is the capital gains tax rate in Canada in 2026?
There is no separate capital gains rate. A capital gain is included in income at the inclusion rate of 50%, then taxed at your marginal rate. On a $10,000 gain, $5,000 is taxable, so someone at a 30% marginal rate pays about $1,500.
Did the capital gains inclusion rate increase?
No. The proposed increase was cancelled by the federal government on March 21, 2025, and the CRA capital gains guide for the 2025 tax year describes the inclusion rate as one-half.
How do I calculate capital gains tax in Canada?
Subtract the adjusted cost base and selling costs from the proceeds to get the gain, multiply by 50% for the taxable capital gain, add it to your income and apply your marginal rate. Report it on Schedule 3 and line 12700.
Do I pay capital gains tax when I sell my house in Canada?
Not on your principal residence if it was solely your principal residence for every year you owned it, but you must report the sale and designate the property on your return. Other property, such as a rental, can have a taxable gain.
Are capital gains in a TFSA taxed?
No. The CRA says income from interest, dividends or capital gains in a TFSA is generally tax-free, and withdrawals are tax-free. Frequent professional-style trading can lead the CRA to tax the income as business income.
Can capital losses reduce my tax?
Yes. Capital losses first offset capital gains in the same year. A net capital loss can be applied to taxable capital gains of the three previous years or carried forward indefinitely. Superficial losses are denied.
Is the Lifetime Capital Gains Exemption still $1.25 million?
The March 2025 announcement said the government would keep the LCGE increase to $1,250,000 for qualifying small business shares and farming and fishing property and introduce legislation in due course. Check CRA guidance before relying on it for a specific sale.
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Sources
Government of Canada, Prime Minister of Canada, Prime Minister Mark Carney cancels proposed capital gains tax increase (March 21, 2025; $1,250,000 LCGE), CRA, Capital gains guide (T4037, 2025) (definition of a capital gain, inclusion rate of 1/2), Calculating and reporting your capital gains and losses (ACB method, $2,440 example, line 12700), Capital losses (offset, 3-year carryback, indefinite carryforward, superficial loss), Principal residence (designation, T2091(IND), one home per family, half hectare, 365-day flipping rule), What is a TFSA, Registered Retirement Savings Plan and the CRA table of RRSP, TFSA and other limits ($7,000 TFSA and $33,810 RRSP for 2026). Dana is an illustrative example with an assumed 30% marginal rate, and the arithmetic is ours.