Canada's Capital Gains Inclusion Rate Is 50%: Clearing Up Two Years of Confusion
Llandora·Updated 2026-10-14
⚠️ Disclaimer: For general information only — not tax, financial, legal, or medical advice. Figures may be outdated or incorrect; tax rules change frequently. Verify important decisions with the CRA/IRS or a qualified professional (for health topics, a licensed healthcare provider). You use this information at your own risk.
The short answer
If you followed Canadian tax news between 2024 and 2025, you heard that the capital gains inclusion rate was rising to 66⅔%. Then you heard it was delayed. Then cancelled. Here is the settled position: the inclusion rate is 50% for everyone — individuals, corporations, and trusts — under section 38 of the Income Tax Act, exactly where it has been for decades. For newcomers holding assets from before they arrived in Canada, understanding what happened (and what did not) matters more than the headline.
What the inclusion rate actually is
A capital gain is the profit when you sell (or are deemed to sell) property for more than you paid: stocks, a rental property, a business. The inclusion rate is the fraction of that gain that counts as income. At 50%, a $100,000 gain adds $50,000 to your taxable income, and you pay tax at your marginal rate on that $50,000. The inclusion rate is not itself a tax rate — a common misunderstanding.
The timeline of the proposal that never happened
Date
What happened
April 2024
Federal budget proposes raising the inclusion rate to 66⅔% on gains above $250,000 per year for individuals (all gains for corporations and most trusts), effective June 25, 2024
June 25, 2024
Proposed start date passes — but the legislation was never enacted
January 31, 2025
Department of Finance defers the start to January 1, 2026
March 21, 2025
Prime Minister announces the increase will not proceed — cancelled outright
Because the deferred start date came after the cancellation, the two-thirds rate never applied to anyone, for any gain, in any year. Section 38 still reads one-half. The CRA administers the 50% rate.
One related measure was kept: the Lifetime Capital Gains Exemption (LCGE) increase to $1.25 million for qualifying small business shares and farm/fishing property, effective June 25, 2024, with indexation after that. A proposed Canadian Entrepreneurs' Incentive (a 33⅓% inclusion rate on up to $2 million of gains) was scrapped along with the main proposal.
Why this matters especially for newcomers
Newcomers often arrive with pre-existing assets: foreign bank accounts, stocks, a property back home. Three points matter:
Departure/arrival-year dispositions. Canada generally taxes you on worldwide income from the day you become resident. Gains that accrued before you became resident are normally not taxed in Canada — but the mechanics (deemed acquisition at fair market value on arrival) need to be right, or you can overpay.
Don't plan around dead proposals. Some newcomers delayed selling assets waiting for "clarity" on the 66⅔% rate. There is nothing left to wait for: it is 50%, full stop.
Principal residence is untouched. The exemption for a designated principal residence was never part of the proposal and never changed. (A separate residential property flipping rule — deeming quick resales as business income — was never cancelled either, and still applies.)
Frequently asked questions
I sold assets in 2024 thinking the higher rate was coming. Can I undo that?
No — a completed sale is a completed sale. The lesson is procedural, not retroactive: tax proposals are not law until enacted, and this one never was.
Does the 50% rate apply to my foreign stocks and property?
Yes, once you are a Canadian tax resident, the 50% inclusion rate applies to your worldwide capital gains, with foreign tax credits generally available for tax paid abroad. Check the relevant tax treaty — wording like this article's is general information, not advice for your holdings.
What about the $250,000 threshold I keep reading about?
That threshold was part of the cancelled proposal (individuals would have kept the 50% rate below $250,000 of annual gains). It does not exist in law. Ignore articles that present it as current.
I heard the LCGE went up. Does that affect me as a newcomer?
Only if you sell qualifying small business corporation shares or qualifying farm/fishing property. Most newcomers' first Canadian gains are on investments or real estate, where the LCGE does not apply. Confirm eligibility with a professional before assuming anything.
Sources
Wealth North, Capital Gains Inclusion Rate Canada 2026 (timeline of proposal, deferral, cancellation): https://wealthnorth.ca/taxes/investment-tax/capital-gains-inclusion-rate/
ModernAxis, Capital Gains Tax Canada 2026 (50% rate, LCGE, reserve, principal residence): https://www.modernaxis.ca/blog/capital-gains-tax-canada-2026
Wealthsimple Help Centre, Canada capital gains tax changes (deferral and exemption details): https://help.wealthsimple.com/hc/en-ca/articles/34223352710427-Canada-capital-gains-tax-changes
This article is general information about Canadian tax rules, not tax advice. The figures above reflect the law as described by the cited sources — confirm current rules on canada.ca and consult a licensed Canadian tax professional before acting on gains, especially cross-border ones.
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