Capital Gains Tax in Canada 2025

Updated March 2025 • bremo.io

Capital gains tax is one of the most misunderstood areas of Canadian tax law. When you sell an asset for more than you paid for it, you have realized a capital gain — and a portion of that gain must be included in your taxable income. Understanding how this works can save you thousands of dollars.

What Is a Capital Gain?

A capital gain occurs when you sell a "capital property" for more than its adjusted cost base (ACB) plus any selling costs. Capital properties include:

• Stocks, ETFs, mutual funds, and bonds
• Rental properties and investment real estate
• Cryptocurrency
• Vacant land
• Shares of a private corporation
• Collectibles (art, coins, stamps) with some special rules

How Capital Gains Tax Is Calculated

Only a portion of your capital gain is taxable — this is called the "inclusion rate." For 2025:

• First $250,000 of annual net capital gains: 50% inclusion rate
• Above $250,000 per year: 66.67% inclusion rate

The included amount is added to your regular income and taxed at your marginal rate. There is no separate "capital gains tax rate" in Canada — it is your ordinary income tax rate applied to the included portion.

Example Calculation

Principal Residence Exemption

The sale of your principal residence is generally fully exempt from capital gains tax. A principal residence is a property you ordinarily inhabited at some point during each year you designate it as such. Key rules:

• You must report the sale on Schedule 3 of your T1 return (even if fully exempt)
• If you rented part of your home or used it for business, a partial exemption may apply
• You can only designate one property per year as your principal residence (per family unit)
• Non-residents of Canada cannot claim the exemption

Capital Losses

Capital losses can be used to offset capital gains. Unused capital losses can be:

• Carried back 3 years to offset capital gains in those years
• Carried forward indefinitely to offset future capital gains

Capital losses can only offset capital gains — they cannot reduce other types of income (with the exception of allowable business investment losses).

Lifetime Capital Gains Exemption (LCGE)

The LCGE shields certain capital gains from tax entirely. For 2025:

Cryptocurrency and Capital Gains

CRA treats cryptocurrency as a commodity. Buying and selling crypto triggers capital gains or losses in most circumstances. Each trade is a taxable event — including trading one crypto for another. Keep detailed records of every transaction, including the date, amount in CAD, and purpose.

Strategies to Minimize Capital Gains Tax

• Hold investments in a TFSA: Growth in a TFSA is completely tax-free, including capital gains.
• Hold investments in an RRSP: Capital gains grow tax-deferred inside an RRSP.
• Tax-loss harvesting: Sell losing positions to create capital losses that offset gains.
• Use the superficial loss rule carefully: You cannot repurchase the same (or identical) security within 30 days of selling at a loss.
• Donate appreciated securities: Donating shares to a registered charity eliminates the capital gain entirely while generating a donation receipt.
• Spread dispositions across tax years: Timing sales across two calendar years can keep gains below $250,000 per year to avoid the higher inclusion rate.