Capital Gains Tax Canada 2025

How capital gains are taxed in Canada, the 2024 inclusion rate changes, principal residence exemption, and legal ways to minimize what you owe.

How Capital Gains Tax Works in Canada

Canada does not have a separate capital gains tax rate. Instead, a portion of your capital gain — called the "taxable capital gain" — is added to your regular income and taxed at your marginal rate. The percentage of the gain that is included is called the inclusion rate.

2024 Capital Gains Inclusion Rate

The 2024 federal budget proposed increasing the capital gains inclusion rate. As of the 2024 tax year:

Taxpayer	Annual Gains	Inclusion Rate
Individuals	Up to $250,000	50% (1/2)
Individuals	Above $250,000	66.67% (2/3)
Corporations and most trusts	All amounts	66.67% (2/3)

Note: The $250,000 annual threshold for the lower rate applies to net capital gains in a year. Legislative changes were still being finalized — confirm with a tax professional for your specific situation.

How to Calculate Your Capital Gain

Capital gain = Proceeds of disposition minus Adjusted Cost Base (ACB) minus selling costs

• Proceeds: What you sold the asset for
• ACB: What you paid for the asset, plus costs to acquire it (commissions, legal fees)
• Selling costs: Commissions, legal fees paid on the sale

Example: Buy 100 shares at $50 each ($5,000), sell at $80 each ($8,000), pay $100 commission each way. Capital gain = $8,000 - $5,000 - $200 = $2,800. With 50% inclusion rate: $1,400 is added to your income.

Principal Residence Exemption

When you sell your home, the gain is generally exempt from capital gains tax if it qualifies as your principal residence for every year you owned it. You must designate the property as your principal residence on Schedule 3 in the year of sale. Key rules:

• Only one property per family unit can be designated as a principal residence per year
• The property must be ordinarily inhabited by you, your spouse, or your children
• If you rented out part of your home, only the personal-use portion is exempt
• Converting your home to a rental property (or vice versa) may trigger a deemed disposition

Capital Losses

A capital loss occurs when you sell an asset for less than you paid. Capital losses can only be applied against capital gains — not other income. You can carry capital losses back 3 years or forward indefinitely. If you have unused capital losses from prior years, they can reduce capital gains in the current year.

Superficial Loss Rule

The CRA's superficial loss rule prevents you from selling an investment at a loss and immediately buying it back to claim the loss. If you (or an affiliated person) buys the same or identical security within 30 days before or after the sale, the capital loss is deemed a "superficial loss" and is denied — instead added to the ACB of the repurchased security.

Tax Strategies to Minimize Capital Gains

• Hold investments in TFSA: Capital gains inside a TFSA are completely tax-free
• Use RRSP/RRIF: Gains inside registered accounts are tax-deferred
• Tax-loss harvesting: Sell losing positions to offset gains (watch superficial loss rules)
• Defer until lower-income years: Sell assets in years when your marginal rate is lower
• Donate shares in-kind: Donating appreciated securities to charity eliminates the capital gain entirely
• Lifetime Capital Gains Exemption: $1.25 million exemption for qualifying small business shares and farm/fishing property