Capital Gains

A capital gain is the profit realized when a capital property — such as shares in a corporation or business assets — is sold for more than its adjusted cost base. In Canada, only a portion of the capital gain is included in taxable income; this proportion is called the inclusion rate.

The current capital gains inclusion rate for individuals is 50%, meaning half of the gain is added to your taxable income in the year of sale. A proposed increase to 66.67% announced in the 2024 federal budget was permanently cancelled on March 21, 2025, and never took effect. At Ontario's top marginal rate of approximately 53.5%, the effective capital gains tax rate is roughly 26.75%.

For qualifying business owners selling Qualified Small Business Corporation (QSBC) shares, up to $1,275,000 of capital gains may be sheltered from tax using the Lifetime Capital Gains Exemption (LCGE) in 2026.

See also: LCGE, QSBC, Inclusion Rate, Asset Sale, Share Sale.