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🇨🇦 CRA & Finance Canada Capital Gains Rules • 2026

Canada Capital Gains Tax Rules 2026

Understand the current 2026 Canadian capital-gains regime, including the 50% inclusion rate, the cancelled $250,000 threshold proposal, indexed LCGE, principal residence exemption, capital losses, corporate gains and the Capital Dividend Account.

1. What Is the Capital Gains Inclusion Rate in 2026?

Canada's current federal capital-gains inclusion rate is 50%. The federal government previously proposed increasing the rate to two-thirds for corporations and most trusts and for an individual's capital gains above a proposed $250,000 annual threshold. The government later confirmed in Budget 2025 that it would not proceed with those proposed changes. Therefore, for the current 2026 regime, the general inclusion rate remains one-half for capital gains realized by individuals, corporations and most trusts, subject to special rules and exceptions.

Key Framework Highlights:
  • The current general capital-gains inclusion rate is 50%.
  • There is no current 2026 rule that automatically changes the inclusion rate to 66.67% once an individual's annual net capital gains exceed $250,000.
  • The previously proposed $250,000 annual threshold and two-thirds inclusion rate were not proceeded with under Budget 2025.
  • The same general 50% inclusion rate applies to corporations and most trusts under the current regime.
  • Different historical inclusion rates can matter when using losses from prior years.
Action Checklist:
  • Determine whether the disposition produces a capital gain, capital loss or business income.
  • Calculate proceeds of disposition, adjusted cost base and eligible outlays/expenses.
  • Determine current-year net capital gains and allowable capital losses.
  • Apply the current 50% inclusion rate unless a specific statutory rule produces a different treatment.
  • Check whether an exemption or deduction such as the principal residence exemption or LCGE applies.
  • Report the disposition on the correct schedule or corporate return.

2. How to Calculate a Capital Gain

A basic capital gain is generally calculated from the proceeds of disposition less the adjusted cost base (ACB) and eligible outlays and expenses incurred to dispose of the property. The resulting gain is then subject to the applicable capital-gains rules and inclusion rate. The actual computation can be more complicated when there are improvements, commissions, deemed dispositions, reserves, foreign-currency transactions, superficial losses, depreciable property or special property classes.

Calculation ComponentWhat It Generally Includes
Proceeds of dispositionAmount received or receivable for the property, subject to special deemed-proceeds and non-arm's-length rules.
Adjusted cost baseOriginal purchase cost plus eligible capital additions and other adjustments.
Outlays and expensesReasonable selling commissions, legal fees and other eligible disposition costs.
Capital lossOccurs when the result is negative, subject to special restrictions for personal-use property, superficial losses and other rules.
Taxable capital gainGenerally one-half of the applicable net capital gain under the current 2026 inclusion rate.

3. Individuals, Corporations and Trusts — Current 2026 Comparison

The previously proposed distinction between individuals above and below $250,000 and corporations from the first dollar is no longer the current federal regime. The current general inclusion rate is 50%. The main differences among taxpayers arise from the deductions, exemptions, loss rules, corporate tax treatment, trust allocations and special provisions available to each taxpayer.

TaxpayerCurrent General Inclusion RateLCGE Available Directly?Important Additional Rules
Individual50%Yes, where the individual satisfies the requirementsMay qualify for LCGE, principal residence exemption and other individual-specific provisions.
CCPC / other corporation50%No corporate LCGECorporate capital gains interact with refundable tax, capital dividend account and other corporate-tax rules.
TrustGenerally 50%Generally not in its own rightCertain personal trusts can allocate qualifying taxable capital gains to beneficiaries who may have individual deductions where the statutory conditions are satisfied.
Principal residence disposition by qualifying individualPotentially exemptN/APrincipal residence exemption must satisfy the applicable designation and ownership/use rules.

4. What Happened to the Proposed $250,000 / 66.67% Rule?

Budget 2024 proposed a two-thirds capital-gains inclusion rate for corporations and most trusts and for the portion of an individual's annual capital gains above $250,000. The implementation was initially proposed for dispositions beginning June 25, 2024, later deferred to January 1, 2026, and was administered by CRA as a proposal rather than enacted law. Budget 2025 subsequently confirmed that the government would not proceed with the proposed capital-gains inclusion-rate increase. The cancelled proposal should therefore not be presented as a 2026 tax rule.

5. Lifetime Capital Gains Exemption (LCGE) — 2026

The Lifetime Capital Gains Exemption (LCGE) is available to individuals who dispose of qualifying small business corporation shares or qualified farm or fishing property and satisfy the statutory conditions. The LCGE amount was increased to $1.25 million for qualifying dispositions and is indexed beginning in 2026. With the 2.0% federal indexation factor for 2026, the indexed amount is $1,275,000 for the 2026 tax year. The exemption is implemented as a deduction in computing taxable income, so the mechanics are not simply a cash credit against tax.

Key Framework Highlights:
  • 2026 indexed LCGE amount: $1,275,000 for eligible capital gains, before considering the individual's remaining cumulative limit and other statutory restrictions.
  • The LCGE is generally available for qualifying small business corporation shares and qualified farm or fishing property.
  • The LCGE is a lifetime limit and must be reduced by amounts previously claimed.
  • The individual must satisfy the detailed QSBC, farm or fishing property and other statutory requirements.
  • Cumulative net investment loss and other limitations can reduce the deduction actually available.
PropertyPotential LCGE EligibilityMajor Conditions
Qualified small business corporation sharesYesShare and corporation must satisfy the QSBC tests at the relevant times.
Qualified farm propertyYesFarm-property qualification tests must be met.
Qualified fishing propertyYesFishing-property qualification tests must be met.
Listed shares, rental property or ordinary investment propertyNo ordinary LCGEThese assets do not qualify merely because they increased in value.

6. Principal Residence Exemption (PRE)

The principal residence exemption can eliminate some or all of an individual's capital gain on a qualifying principal residence. The property must satisfy the statutory principal-residence conditions, and the taxpayer generally must designate the property for the relevant years. Since 2016, the CRA generally requires the disposition and designation to be reported to claim the exemption.

Key Framework Highlights:
  • A principal residence can generally be a house, condominium, cottage, mobile home or other housing unit that satisfies the definition.
  • Only one property per family unit can generally be designated as a principal residence for a particular year, subject to the detailed family-unit rules.
  • The property does not have to be occupied every day to qualify, but the residence requirements must be met.
  • A change in use from principal residence to rental or business property can trigger deemed-disposition and election issues.
  • The exemption may not cover every dollar of a gain when only part of a property qualifies or when the designation does not cover the entire ownership period.
Action Checklist:
  • Report the disposition on Schedule 3.
  • Determine which years the property qualifies as the principal residence.
  • Complete Form T2091(IND) where CRA requires it.
  • Review any change-in-use, rental, business-use or non-resident issues.
  • Maintain purchase, improvement, sale and ownership records.

7. Capital Losses: Carryback and Carryforward Rules

Ordinary net capital losses cannot generally be used to reduce employment income, business income or other ordinary taxable income. They are generally available against taxable capital gains. A net capital loss can generally be carried back three years or carried forward indefinitely. Special rules apply to allowable business investment losses (ABILs), which receive more favourable treatment and can initially be available against other sources of income.

Loss TypeGeneral ApplicationCarry Period
Ordinary net capital lossAgainst taxable capital gainsBack 3 years; forward indefinitely
Allowable business investment loss (ABIL)Can be deducted against other income subject to the statutory rulesUnapplied amount generally follows non-capital-loss rules before becoming a net capital loss
Personal-use property lossGenerally not deductibleNo ordinary carryover
Listed personal property lossAgainst net gains from listed personal propertyBack 3 years; forward 7 years

8. Capital Dividend Account (CDA) for Canadian Corporations

The Capital Dividend Account is a corporate tax account that can permit a Canadian-resident private corporation to pay capital dividends to shareholders without the dividend being included in the shareholder's income, provided the corporation has sufficient CDA balance and follows the required election procedure. Under the current 50% capital-gains inclusion regime, the non-taxable portion of a capital gain is generally 50%, before considering other CDA additions, reductions and special rules.

Key Framework Highlights:
  • The CDA is not a bank account and does not itself hold cash.
  • The non-taxable portion of qualifying capital gains is an important CDA component.
  • The CDA can also receive certain life-insurance proceeds and other amounts specified by the Income Tax Act.
  • Paying a capital dividend in excess of the available CDA balance can trigger significant Part III tax.
  • A corporation must make the required election before or when paying a capital dividend under the applicable rules.

9. Cryptocurrency and Investment Assets

Selling cryptocurrency and other investment assets can generate either a capital gain or business income depending on the taxpayer's circumstances. The fact that an asset is digital does not determine the tax character. CRA considers factors such as frequency of transactions, intention, holding period, knowledge and experience, financing and whether the activity resembles a trading business.

ActivityPotential Tax Treatment
Long-term investment with investment-like behaviourMay produce capital gains or losses.
Frequent organized trading with business characteristicsMay produce business income or business losses rather than capital gains.
Crypto used to buy goods or servicesCan constitute a disposition that must be considered for tax purposes.
Crypto exchanged for another crypto assetCan constitute a taxable disposition.

10. Foreign Currency and Capital Gains

Capital gains involving US dollars, euros, pounds or other foreign currencies must be calculated in Canadian dollars. The relevant proceeds, adjusted cost base and disposition expenses need to be converted using a reasonable, supportable exchange rate. Currency fluctuations themselves can therefore contribute to the Canadian-dollar capital gain.

Action Checklist:
  • Record the original foreign-currency purchase amount and date.
  • Record the disposition amount and date.
  • Convert the relevant amounts into CAD using a supportable exchange-rate methodology.
  • Use separate transaction dates where the acquisition and disposition occur at different exchange rates.
  • Retain exchange-rate evidence and transaction statements.

11. Special Capital-Gain Situations

SituationSpecial Rule to Consider
Depreciable propertyA disposition can generate both capital gain/loss and recapture of capital cost allowance; the calculation is not a simple investment-property capital gain.
Personal-use propertyCapital losses are generally restricted; listed personal property has separate gain/loss rules.
Superficial lossA capital loss can be denied where the taxpayer or an affiliated person acquires substituted property within the relevant period.
Non-arm's-length dispositionSpecial deemed-proceeds and loss-denial rules may apply.
Gift of capital propertyThe disposition can occur at fair market value and special donation/gift rules may apply.
DeathDeemed-disposition rules can trigger capital gains immediately before death, subject to spousal, common-law and other rollover rules.
Principal residence converted to rentalChange-in-use and election rules can defer or trigger a deemed disposition depending on the facts.
Capital gains reserveA qualifying reserve can sometimes defer recognition of part of a gain where the consideration is received over multiple years.

12. Corporate Capital Gains and Refundable Tax

A corporation's capital gains are included in corporate taxable income under the corporate tax rules, but the tax consequences are not identical to those of an individual. For a Canadian-controlled private corporation, taxable capital gains can affect refundable tax and the corporation's capital dividend account. The net result depends on the corporation's other investment income, active business income, losses, tax rates and integration rules.

Key Framework Highlights:
  • The general capital-gains inclusion rate is currently 50%, including for corporations.
  • A corporation does not receive an individual LCGE.
  • A private corporation can potentially add the non-taxable portion of qualifying capital gains to its CDA.
  • Corporate investment-income tax and refundable tax mechanisms can affect the eventual tax burden and shareholder-level tax.
  • Using a corporation to hold investments therefore requires analysis beyond simply multiplying the gain by 50%.

13. Filing Capital Gains on T1 and T2 Returns

Individuals generally report capital dispositions on Schedule 3 and carry the applicable taxable capital gain or allowable capital loss to the relevant lines of the T1 return. Corporations report capital gains and losses through the T2 return and applicable schedules. The exact schedule depends on the property and transaction.

TaxpayerMain FilingCommon Capital-Gain Reporting
IndividualT1 GeneralSchedule 3 and applicable deduction or loss forms
CorporationT2 Corporation Income Tax ReturnT2 schedules and corporate capital-gain/loss calculations
TrustT3 Trust Income Tax and Information ReturnTrust schedules and beneficiary designations where applicable
Action Checklist:
  • Keep purchase and disposition documents.
  • Calculate ACB and disposition expenses.
  • Report the disposition in the correct return and schedule.
  • Apply current-year capital losses before using prior-year net capital losses where required.
  • Check LCGE, PRE and other deductions or exemptions.
  • Retain records supporting all calculations.

14. 2026 Capital Gains Planning Checklist

The current 2026 regime makes planning around realization dates, losses, exemptions and qualifying property particularly important. Taxpayers should not plan transactions using the cancelled two-thirds proposal as though it were current law.

Action Checklist:
  • Confirm whether the asset is capital property or part of a business operation.
  • Calculate ACB accurately, including improvements and transaction costs.
  • Review unused capital losses from prior years.
  • Consider whether a disposition creates a superficial loss problem.
  • Determine whether the LCGE is available and confirm QSBC/farm/fishing eligibility.
  • For a home sale, review the principal-residence designation and T2091 requirements.
  • For corporate assets, review CDA and refundable-tax consequences before selling.
  • For foreign investments, convert all amounts to Canadian dollars using supportable exchange rates.
  • Review the tax impact of a transaction before the disposition occurs rather than after filing.
  • Use the current 50% inclusion rate for general 2026 planning unless a specific statutory exception applies.

15. Key 2026 Capital Gains Takeaways

Key Framework Highlights:
  • Current general inclusion rate: 50%.
  • The proposed 66.67% rate and $250,000 individual threshold are not current 2026 law.
  • The Canadian Entrepreneurs' Incentive proposal was not proceeded with.
  • The LCGE is $1.25 million for 2025 and is indexed beginning in 2026; with the 2026 2.0% federal indexing factor, the indexed amount is $1.275 million.
  • Net capital losses generally carry back 3 years and forward indefinitely.
  • Ordinary capital losses generally cannot reduce employment income; ABILs have special treatment.
  • A principal-residence disposition generally must be reported even when the principal-residence exemption shelters the gain.
  • The CDA can permit qualifying private corporations to distribute certain tax-free capital dividends, subject to the statutory balance and election requirements.
  • Cryptocurrency can generate either capital or business income depending on the facts.

Frequently Asked Questions

The current general federal capital-gains inclusion rate is 50%. The previously proposed two-thirds rate and $250,000 annual threshold for individuals were not proceeded with under Budget 2025, so they should not be used as the general 2026 rule.

The LCGE was increased to $1.25 million for qualifying gains and indexation resumes in 2026. With the 2.0% federal indexation factor for 2026, the indexed amount is $1.275 million, subject to the individual's remaining lifetime limit and all qualifying conditions.

No. The LCGE is an individual deduction. A corporation does not receive an individual LCGE, although qualifying capital gains may have other corporate consequences, including additions to the Capital Dividend Account.

Ordinary net capital losses generally cannot be deducted against salary or other ordinary income. They are generally carried back up to three years or forward indefinitely to offset taxable capital gains. Allowable business investment losses are different and can receive more favourable treatment under the Income Tax Act.

A qualifying principal residence can have its entire gain sheltered by the principal residence exemption, but the exemption is not automatic. The property and ownership history must satisfy the applicable rules, the disposition must generally be reported, and mixed-use or change-of-use situations can limit the exemption.

For a Canadian private corporation, the non-taxable portion of qualifying capital gains is generally an important addition to the CDA. Under the current 50% inclusion-rate regime, that portion is generally 50% of the qualifying gain before other CDA adjustments. A corporation can potentially pay a capital dividend from its available CDA balance tax-free to shareholders if it makes the required election and does not exceed its available balance.

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Capital Gains Metrics — 2026

  • Current General Inclusion Rate
    50% for individuals, corporations and most trusts
  • Former $250,000 Proposal
    Not proceeding under Budget 2025
  • 2026 LCGE
    $1,275,000 indexed amount for eligible gains
  • Net Capital Loss Carryforward
    3 years back / indefinitely forward
  • Principal Residence
    Potentially fully exempt if all PRE conditions are met

Related Tax Tools

Corporate Tax Rates & SBD Guide→CRA Alternative Minimum Tax (AMT) Guide→Sole Proprietorship Tax Guide→

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