Capital Gains Tax in Canada Explained: What You’ll Pay in 2026 and How to Lower Your Tax Bill

The rules around **capital gains tax in Canada** are changing, and for investors and property owners, 2026 could mark a significant turning point. With policy updates aimed at adjusting how much of your capital gains are taxable, understanding what’s ahead is essential for anyone looking to optimize their financial future. Whether you’re selling stocks, cryptocurrency, a second property, or growing your company’s valuation, clarity on these new regulations can help you avoid surprises—and possibly save thousands at tax time.

Canada has long used a partial inclusion method for capital gains, meaning only a percentage of your profit from selling appreciated assets counts toward your taxable income. But in 2026, that inclusion rate is rising. This means larger tax bills for many Canadians—especially those with significant one-time gains or growing portfolios. But public response has been mixed, with debate about who really benefits and who takes the financial hit.

Overview of Capital Gains Tax in Canada (2026 Update)

What changed this year

In a bid to increase federal revenue and address wealth inequality, the government is amending the capital gains inclusion rate—from **50% to 66.67%** for gains above an annual threshold of $250,000 for individuals. The entire gain will be taxed at this higher rate for corporations and trusts. This change doesn’t impact every Canadian equally and is targeted primarily at higher-income individuals, real estate investors, and corporations.

Effectively, an individual selling assets for a gain of over $250,000 in a given year will now face a substantially higher tax burden on the portion that exceeds that threshold. Smaller investors and those who achieve occasional windfalls within the exemption limit will still benefit from the lower inclusion rate. In contrast, trusts and businesses now face a more comprehensive application.

Why the inclusion rate matters

The capital gains tax is applied to your net gain—the difference between what you paid for an asset and what you sold it for. However, Canada only taxes a portion of that gain, known as the **inclusion rate**. For decades, this inclusion rate has remained at 50%, meaning only half of your capital gain was considered part of your taxable income. As of 2026, that will change dramatically for select groups.

For example, if you realize $400,000 in capital gains, under the previous 50% regime, $200,000 would be taxable. In 2026, the first $250,000 remains at 50%, but the remaining $150,000 will be taxed at the new 66.67% rate. This leads to higher taxable income and ultimately a **higher personal tax bill**—especially for those already in the top marginal tax brackets.

Who qualifies and why it matters

The federal government introduced a $250,000 annual threshold as a way to shield the average taxpayer from the brunt of the increases. So, if your total gains in a year fall under this amount, you won’t see much difference.

But for high-net-worth individuals, real estate investors, and anyone selling a business or property for a significant profit, the increased inclusion rate significantly **erodes net returns**.

“The impact of these changes really depends on how frequently and how large your realized capital gains are. For many Canadians, it may be a non-issue. But for entrepreneurs selling a business or investors unlocking substantial gains, the tax increase is far from minor.”
— Laura Chen, CPA and Tax Strategist

Which assets are affected

The new rules broadly affect most capital property, including but not limited to:

• Stocks and mutual funds
• Cryptocurrency
• Investment real estate (not principal residences)
• Private business equity
• Trust-held assets

Your **primary residence remains exempt**, although second properties such as vacation homes or rental units fall squarely into the new framework.

Winners and losers under the new rules

How to lower your tax bill legally

There are several strategies to legally mitigate the impact of rising capital gains tax liability. Here are some of the most effective:

• Use tax-sheltered accounts: TFSA and RRSP transactions remain untouched by these new changes when gains are realized inside the plan.
• Time your gains: If possible, spread sales over multiple years to stay under the $250,000 annual threshold.
• Take advantage of your principal residence exemption: Ensure that gains on your primary home are accurately classified to avoid unnecessary taxes.
• Claim the Lifetime Capital Gains Exemption (LCGE): Entrepreneurs and farmers may shield over **$1 million** in gains when exiting their businesses.
• Implement income-splitting techniques: Shift gains to lower-income family members where allowed under tax law.

How business owners are affected

For entrepreneurs, particularly those planning to sell or exit their businesses, these changes can complicate succession planning. Although the **LCGE (Lifetime Capital Gains Exemption)** remains in place, gains above the exemption limit face heavier taxation than before. In high-value exits, the shift from 50% to 66.67% inclusion can result in **six-figure tax increases**.

Professional guidance from a tax advisor or estate planner is now more critical than ever for business owners considering retirement or sale within the next few years.

What accountants are advising now

Financial professionals are strongly encouraging clients to revisit their plans before 2026. In some cases, realizing gains earlier—before the new rates take effect—can be a beneficial move, especially for those near or above the impending inclusion thresholds.

“We’re advising clients nearing key milestones—selling property, divesting shares, or retiring—to run updated simulations under the new tax regime. Timing is now part of your tax strategy more than ever.”
— Daniel Rousseau, Financial Advisor

Final thoughts for Canadian investors and homeowners

The incoming capital gains tax changes in 2026 represent both a **challenge and an opportunity**. While some Canadians will barely notice a difference, others may face steep new tax bills. With proper planning, however, you can minimize your exposure, make the most of your exemptions, and benefit from timely asset sales.

Get started by speaking to a licensed tax expert or financial advisor before the new rules take effect. 2026 may feel far away—but the smart money is preparing today.

Frequently Asked Questions (FAQs)

What is a capital gain?

A capital gain occurs when you sell an asset for more than you paid for it. The difference between the two amounts is considered your gain and can be subject to tax.

What is the new inclusion rate starting in 2026?

Starting January 1, 2026, the inclusion rate increases from 50% to 66.67% for individuals with over $250,000 in annual capital gains and for all corporations and trusts.

How much can I still earn in gains without paying higher tax?

Individuals can realize up to $250,000 in capital gains annually at the 50% inclusion rate. Gains above that will be taxed at the 66.67% rate starting in 2026.

Is the sale of my principal residence affected by this change?

No, the capital gains on your principal residence remain exempt from taxation, provided it meets the CRA’s conditions for exemption.

Will these changes affect my RRSP or TFSA?

No, assets held in RRSPs and TFSAs continue to grow tax-sheltered. The changes to capital gains inclusion rates do not apply within these registered accounts.

Can I reduce my tax by selling assets now?

Potentially, yes. Depending on your circumstances, crystallizing capital gains before January 1, 2026, could help you lock in the lower 50% inclusion rate.