Updated: April 2025  |  bremo.io financial guides

Canada Capital Gains Tax 2025

Capital gains arise when you sell a capital property — such as stocks, real estate, or other investments — for more than you paid. Canada does not tax 100% of capital gains; instead, only a portion is "included" in your income and taxed at your marginal rate. Understanding how capital gains work is essential for every Canadian investor and property owner.

Capital Gains Inclusion Rate

For most Canadians, the capital gains inclusion rate is 50% for annual gains under $250,000. This means if you sell shares for a $20,000 gain, only $100 is added to your taxable income.

The 2024 federal budget proposed increasing the inclusion rate to 66.67% on capital gains above $250,000 annually for individuals (and on all gains for corporations and most trusts). The higher inclusion rate applies to gains above the $250,000 threshold. Confirm the current status of this legislation as it may still be subject to parliamentary approval.

Calculating a Capital Gain

Your capital gain is: Proceeds of disposition minus Adjusted Cost Base (ACB) minus Selling Costs

• Proceeds of disposition: The sale price (or fair market value at time of disposition)
• Adjusted Cost Base (ACB): Original purchase price plus commissions, reinvested dividends, and capital improvements
• Selling costs: Commissions, legal fees, and other costs of selling

Tracking your ACB carefully is your responsibility — especially for investments held over many years with dividends reinvested through a DRIP program.

Capital Losses

When you sell a capital property for less than your ACB, you have a capital loss. Capital losses can only be applied against capital gains — they cannot reduce other income. Rules:

• Net capital losses in the current year can be applied against any capital gains from the current year
• Excess losses can be carried back 3 years or carried forward indefinitely to offset future gains
• The superficial loss rule prevents claiming a loss if you repurchase the same (or identical) security within 30 days before or after the sale

Principal Residence Exemption

The sale of your principal residence is generally fully exempt from capital gains tax. You designate the property as your principal residence for each year you own it and lived in it. If the property was your principal residence for every year of ownership, the entire gain is exempt. You must still report the sale on Schedule 3 and Form T2091 even if you claim the full exemption.

Lifetime Capital Gains Exemption (LCGE)

Canadians who own qualifying small business corporation shares, qualified farm property, or qualified fishing property may shelter significant capital gains using the Lifetime Capital Gains Exemption. For 2025, the LCGE is approximately $1.25 million for qualified small business shares and $1.25 million for farm/fishing property.

Capital Gains Inside Registered Accounts

Capital gains inside a TFSA are permanently tax-free. Gains inside an RRSP or RRIF are sheltered from tax until withdrawal, at which point the entire withdrawal is taxed as regular income (not at the preferential capital gains rate). This means it is often tax-efficient to hold foreign dividend and interest-generating investments inside the RRSP and growth investments (stocks, ETFs) inside the TFSA.

Tax-Loss Harvesting

Tax-loss harvesting is the strategy of selling investments at a loss before year-end to offset realized capital gains. This is particularly useful in December when you can see your full-year capital gain picture. Remember the 30-day superficial loss rule — you cannot buy back the same investment within 30 days and still claim the loss.