Capital Gains Tax Canada 2025: The Inclusion Rate Saga Explained

The capital gains inclusion rate for 2025 is 50%. For everyone — individuals, corporations, trusts. The proposed increase to 66.67% that dominated tax headlines throughout 2024 was deferred repeatedly and ultimately cancelled in early 2025. If you held off selling assets because of the uncertainty, the coast is clear.

Here’s how capital gains actually work in Canada and what you owe when you sell.

How Capital Gains Tax Works

You only pay tax when you dispose of an asset. Buying and holding triggers nothing. The tax hits when you sell.

The formula is simple:

Capital Gain = Sale Price - Adjusted Cost Base (ACB) - Selling Costs

Then you take 50% of that gain — the “taxable capital gain” — and add it to your regular income for the year. It gets taxed at your marginal rate. So if your marginal rate is 40%, you effectively pay 20% tax on the gain (40% x 50% inclusion).

Example: You bought shares for $10,000 and sold them for $25,000, paying $100 in commission. Your capital gain is $14,900. The taxable portion is $7,450, which gets added to your income and taxed at whatever bracket that pushes you into.

Calculate your tax on investment income —>

The Inclusion Rate Saga

A quick recap for anyone who spent 2024 confused. The federal budget proposed increasing the inclusion rate from 50% to 66.67% for individuals on gains exceeding $250,000 in a year, and on all gains for corporations and trusts. The effective date was supposed to be June 25, 2024.

The legislation never passed. Parliament prorogued. The proposal was deferred, then abandoned in early 2025. For tax years 2024 and 2025, the inclusion rate remains at 50% across the board. No threshold. No two-tier system.

If you filed your 2024 return using the higher rate (some tax software applied it provisionally), you may be eligible for an adjustment. Check with your accountant or refile.

What Triggers a Capital Gain

Not every financial event creates a taxable gain. Here’s what does:

• Selling stocks, ETFs, or mutual funds in a non-registered account (taxable brokerage account)
• Selling real estate other than your principal residence
• Selling cryptocurrency if treated as a capital asset (more on this below)
• Deemed disposition at death — when someone dies, the CRA treats all their assets as if they were sold at fair market value
• Emigrating from Canada — leaving the country triggers a deemed disposition on most assets

And here’s what does not trigger capital gains:

• Selling investments inside a TFSA — completely tax-free, always
• Selling investments inside an RRSP or RRIF — no capital gains tax, but withdrawals are taxed as regular income. See how RRSP contributions affect your tax —>
• Selling your principal residence — fully exempt under the principal residence exemption
• Transferring assets to a spouse at cost (rollover provisions apply)

The Principal Residence Exemption

Your primary home is exempt from capital gains tax. If you bought a house for $400,000 and sold it for $900,000, that $500,000 gain is tax-free as long as it was your principal residence for every year you owned it.

You can only designate one property as your principal residence per year. If you own a cottage and a city home, you’ll need to choose which one to designate for each year of ownership. Getting this wrong can create an unexpected tax bill in the hundreds of thousands.

You must report the sale of your principal residence on your tax return, even though the gain is exempt. Failing to report it can result in penalties and the CRA may deny the exemption.

Lifetime Capital Gains Exemption

If you sell qualifying small business shares, you can shelter up to $1.25 million in capital gains in 2025 (up from approximately $1.016 million in prior years). This is a significant tax break — at a 50% inclusion rate and a 50% marginal rate, that’s roughly $312,500 in tax savings.

To qualify, the shares must be of a Canadian-controlled private corporation (CCPC) that meets specific tests regarding active business use of its assets. This isn’t something you figure out on your own. Get professional advice before claiming it.

Qualifying farm and fishing property also has its own lifetime exemption, also $1.25 million for 2025.

Capital Losses and How to Use Them

Capital losses offset capital gains dollar for dollar. If you made $30,000 in gains and $12,000 in losses in 2025, you only pay tax on $18,000 in net gains (with the 50% inclusion applied to that net figure).

If your losses exceed your gains in a given year, you have a net capital loss. You can carry that loss back three years or forward indefinitely to offset gains in other years. This makes timing your sales strategically worthwhile — if you had a big gain in 2024, you could crystallize a loss in 2025 and carry it back.

One trap to watch for: the superficial loss rule. If you sell a security at a loss and buy the identical security back within 30 days — before or after the sale — the CRA denies the loss entirely. The denied loss gets added to the ACB of the repurchased shares, so it’s not permanently lost, but you can’t use it now. This also applies if your spouse or a corporation you control buys the same security within the 30-day window.

See how capital gains affect your total tax —>

Crypto and Capital Gains

Cryptocurrency dispositions are generally treated as capital gains for most Canadians. If you bought Bitcoin as an investment and sold it later at a profit, the 50% inclusion rate applies to the gain. However, if you trade frequently or crypto trading is your business, the CRA may classify your profits as business income — which is 100% taxable. The distinction matters a lot. We cover this in detail in our crypto tax guide.

Related Guides

• 2025 Canadian Tax Brackets
• 9 Tax Changes for 2025
• How Much Tax on a Salary in Canada