Capital Gains Inclusion Rate Canada 2026 — 2/3 Rule & Calculator

Canada's capital gains inclusion rate changed significantly with the 2024 federal budget, effective for dispositions on or after June 25, 2024. For the 2025 and 2026 tax years, individuals face a two-tier system: the first $250,000 of annual net capital gains is included at 1/2 (50%), while gains above $250,000 are included at 2/3 (66.67%). Corporations and trusts face the 2/3 inclusion rate on all capital gains with no $250,000 threshold.

The Two-Tier Inclusion Rate for Individuals

For individual Canadian taxpayers in 2026:

• First $250,000 of net capital gains: 50% (1/2) inclusion — only half the gain is added to taxable income
• Capital gains above $250,000: 66.67% (2/3) inclusion — two-thirds of the gain above $250,000 is added to taxable income

The $250,000 threshold applies to your annual net capital gains — that is, capital gains minus capital losses for the year. It resets every calendar year, so gains realized in different years each get their own $250,000 threshold.

Corporations and Trusts — 2/3 on All Gains

Corporations (including CCPCs) and trusts face the 2/3 inclusion rate on all capital gains with no $250,000 threshold. A corporation realizing a $500,000 capital gain includes $333,333 in income (2/3 of $500,000) — compared to $250,000 (1/2) under the old rules. This increases the effective corporate tax rate on capital gains from approximately 13% to approximately 17% federally.

The capital dividend account (CDA) — the non-taxable portion of capital gains that can be paid as a tax-free capital dividend to shareholders — is now the remaining 1/3 of gains (down from 1/2). This reduces the CDA credit available for income extraction strategies.

Capital Gains Inclusion Rate Calculator

ACB — Adjusted Cost Base

The capital gain on a sale is the proceeds of disposition minus the adjusted cost base (ACB) minus selling expenses. The ACB is not simply what you paid — it must be tracked carefully:

• Identical properties rule: For identical securities (e.g., multiple purchases of the same stock), the ACB is the average cost of all units held at the time of sale
• Reinvested distributions: Reinvested distributions from ETFs/mutual funds increase your ACB — failing to track them results in paying capital gains tax twice
• Return of capital distributions: ROC distributions reduce your ACB (potentially increasing future capital gains)
• Superficial loss rule: If you sell a security at a loss and repurchase the same or identical security within 30 days, the loss is denied and added to the ACB of the repurchased security

Planning Strategies for the $250,000 Threshold

Spread Gains Across Multiple Years

If you have a large unrealized gain, consider spreading dispositions across multiple tax years to stay within the $250,000 annual threshold in each year. For example, a $600,000 total gain realized over three years ($200,000/year) stays entirely within the 1/2 inclusion threshold — saving significant taxes compared to realizing the entire gain in one year.

Use Capital Losses Strategically

Capital losses reduce net capital gains, pushing more of your gains into the sub-$250,000 threshold at the 1/2 inclusion rate. Harvest losses in the same year as large gains to maximize the benefit of the lower inclusion rate.

Charitable Donation of Securities

Donating publicly traded securities directly to a registered charity eliminates the capital gains tax entirely — the inclusion rate is zero for donated securities. You also receive a charitable donation receipt for the full fair market value. This is the most tax-efficient way to make a large charitable gift.