Capital Gains Inclusion Rate: The Increase Canada Cancelled
The capital gains inclusion rate in Canada is one-half. The proposal to raise it to two-thirds above $250,000 was announced in 2024, deferred in January 2025 and cancelled on 21 March 2025. It never took effect.
This one is worth stating plainly because the internet is full of confident articles written during the eighteen months when the increase looked certain, and most of them were never updated.
What is the capital gains inclusion rate?
The share of a capital gain that counts as income. In Canada it is one-half, so half of any gain is taxed and half is not.
There is no separate rate for capital gains here. The included half joins your other income and is taxed at whatever marginal rate you land in, which means two people with identical gains can owe very different amounts depending on their salaries.
What happened to the proposed increase?
It was announced, postponed and then dropped, across three separate government statements in under a year.
- Budget 2024 proposed a two-thirds inclusion rate on individual gains above $250,000 a year, and on all gains realised by corporations and most trusts, effective 25 June 2024.
- 31 January 2025: the Department of Finance deferred the change to 1 January 2026 and said it still intended to legislate it.
- 21 March 2025: the government announced it would cancel the proposed increase entirely, while keeping the Lifetime Capital Gains Exemption at $1,250,000.
The practical effect is that the inclusion rate has been one-half throughout. Nobody ever filed a return under the two-thirds rule.
What would the increase have cost?
Nothing at all below $250,000, and then one extra dollar of taxable income for every six dollars of gain above it.
Our calculation: the gain above $250,000 multiplied by the difference between two-thirds and one-half, which is one-sixth. Taxable income, not tax owed. The tax would have depended on the marginal rate of whoever realised the gain.
On a $1,000,000 gain the proposal would have added $125,000 to taxable income. At Ontario's top combined marginal rate that is roughly $67,000 of additional tax on a single disposition, which is why the announcement drove so much selling before the original June 2024 date.
Anyone who accelerated a sale to get ahead of a deadline that was subsequently removed paid real tax early for no reason. That is not recoverable, and it is the clearest argument against restructuring around a tax proposal before it is law.
How much tax do you actually pay on a capital gain?
Half your marginal rate, because only half the gain is included.
Computed from the same 2025 federal and Ontario tables as our income tax calculator, including both Ontario surtax tiers. Top combined rate 53.5% on salary against 26.8% on a capital gain.
That halving is the entire Canadian capital gains benefit. It is simpler than the American system, which uses a separate rate schedule and a one-year holding period, and it is also less generous at the bottom: Canada has no equivalent of the US 0% band, so a small gain on a low income is still taxed here.
You can run your own numbers, by province, in our capital gains tax calculator, which uses the same tables as the figure above.
What did survive the reversal?
The Lifetime Capital Gains Exemption increase, which was kept when the inclusion rate change was dropped.
The exemption stands at $1,250,000 on the sale of qualified small business corporation shares and qualified farm or fishing property. It is the single largest capital gains break available to Canadians and it applies to a narrow set of assets, so it matters enormously to business owners and farmers and not at all to someone selling index funds.
How to tell if advice you are reading is stale
Check whether it mentions a date after March 2025. If it does not, treat the numbers with suspicion.
Three markers give away an article written mid-proposal: a two-thirds inclusion rate presented as current, a $250,000 annual threshold described as something to plan around, and a 1 January 2026 start date. All three describe a rule that was cancelled before it ever applied.
Frequently asked questions
What is the capital gains inclusion rate in Canada?
One-half. Fifty percent of a capital gain is included in your income and taxed at your marginal rate, and the other half is not taxed at all. There is no separate capital gains rate schedule in Canada the way there is in the United States.
Did the capital gains inclusion rate go up to 66.67%?
No. It was proposed in Budget 2024, deferred in January 2025, and then cancelled outright on 21 March 2025. The inclusion rate remained one-half throughout and never changed in practice, though a great deal of coverage published in 2024 still describes the increase as happening.
What was the proposed change?
Two-thirds inclusion on the portion of an individual's annual capital gains above $250,000, and two-thirds on all capital gains realised by corporations and most trusts. Gains below the $250,000 individual threshold would have stayed at one-half.
How much tax do you pay on capital gains in Canada?
Half the gain is added to your income and taxed at your marginal rate, so the effective rate is half your marginal rate. At Ontario's top combined rate that works out to roughly 26.8% of the gain, against about 53.5% on the same amount earned as salary.
Is the Lifetime Capital Gains Exemption still $1,250,000?
Yes. The government confirmed in the same March 2025 announcement that it would maintain the increase in the Lifetime Capital Gains Exemption to $1,250,000 on the sale of small business shares and farming and fishing property, even while cancelling the inclusion rate increase.
Do you pay capital gains tax on your home?
Generally no. The principal residence exemption shelters the gain on a home that qualifies as your principal residence for every year you owned it. The inclusion rate debate never touched that exemption, though the disposition still has to be reported on your return.
Does the $250,000 threshold still matter?
No, not for the inclusion rate. It was part of the cancelled proposal and has no effect now, because one-half applies to the whole gain regardless of size. Any planning built around staying below $250,000 a year was rendered unnecessary by the cancellation.
How is this different from the United States?
Fundamentally. The US taxes long-term gains on their own rate schedule of 0%, 15% or 20%, with a holding period deciding whether a gain qualifies. Canada has no holding period, no separate schedule and no preferential long-term category, only the one-half inclusion.
Researching and writing about Canadian personal finance since 2026.
Last reviewed August 2026 · How we research
“Capital Gains Inclusion Rate: The Increase Canada Cancelled.” Vault Nerd, https://www.vaultnerd.com/ca/learn/capital-gains-inclusion-rate, updated August 2026.
- Prime Minister of Canada, Prime Minister Mark Carney cancels proposed capital gains tax increase, 21 March 2025, read 28 August 2026
- Department of Finance Canada, Government of Canada announces deferral in implementation of change to capital gains inclusion rate, 31 January 2025
- Department of Finance Canada, Budget 2024 capital gains inclusion rate proposal and draft legislation, August 2024
- Marginal rates computed from the 2025 federal and Ontario tables used by the Vault Nerd income tax calculator