For more than a year, Canadians heard that capital gains tax was going up. Then it wasn't. If you're selling investments, a rental property, or a business, here's where the rules actually stand as of October 2026.
The short version
- The capital gains inclusion rate is still one-half. The proposed increase to two-thirds was cancelled on March 21, 2025.
- The Lifetime Capital Gains Exemption (LCGE) increase stuck. It rose to $1.25 million on June 25, 2024 and is indexed from 2026. The Department of Finance now cites $1.275 million.
- Selling to an Employee Ownership Trust can shelter up to $10 million of capital gains, and that exemption is now permanent.
- Alternative Minimum Tax can still apply in a year with a very large gain.
The timeline
- April 2024: Budget 2024 proposed raising the inclusion rate from one-half to two-thirds on capital gains above $250,000 a year for individuals, and on all capital gains for corporations and most trusts, effective June 25, 2024.
- January 31, 2025: the government deferred the start date to January 1, 2026.
- March 21, 2025: Prime Minister Carney announced the increase was cancelled outright, while keeping the higher LCGE.
So for 2024, 2025, 2026 and beyond, the inclusion rate is 50%. If you sell an asset with a $100,000 capital gain, $50,000 is added to your taxable income.
If you filed using the higher rate
The CRA had started administering the two-thirds rate before it was deferred. If you or your corporation reported a 2024 gain at the higher rate, check that your assessment reflects the one-half rate, and contact the CRA, or ask us, if it doesn't.
The Lifetime Capital Gains Exemption
The LCGE shelters capital gains on the sale of qualified small business corporation shares and qualified farm or fishing property. Budget 2024 raised it from about $1.02 million to $1.25 million for dispositions on or after June 25, 2024, and the government kept that increase when it cancelled the inclusion rate hike. Indexation resumed in 2026, and the Department of Finance's September 2026 materials cite a limit of $1.275 million.
The LCGE comes with strict conditions, including tests on how the corporation's assets are used and how long the shares were held. Planning usually needs to start well before a sale.
Employee Ownership Trusts: $10 million exemption, now permanent
Individuals who sell a qualifying business to an Employee Ownership Trust (EOT), or convert to a worker cooperative, can exempt up to $10 million of capital gains, subject to conditions. The exemption was originally temporary, covering 2024 to 2026. The Spring Economic Update 2026 proposed making it permanent, and that became law through Bill C-30 in June 2026.
Watch the Alternative Minimum Tax
Since 2024, the Alternative Minimum Tax (AMT) uses a broader base that includes 100% of capital gains, with special treatment for donated securities. Most people never pay AMT, but one year with a large gain and big deductions can trigger it. AMT you pay can generally be carried forward and recovered against regular tax in later years.
What this means if you're selling
- Real estate other than your principal residence: half the gain is taxable. Selling your principal residence still has to be reported, even when the gain is fully exempt.
- Stocks or ETFs in a non-registered account: half the gain is taxable. Capital losses can offset capital gains.
- Your business: review LCGE eligibility early. For larger businesses, an EOT sale may be worth exploring.
Sources
- Prime Minister Mark Carney cancels proposed capital gains tax increase, Prime Minister of Canada
- Government of Canada introduces new Productivity Mega Deduction (lists the $1.275 million LCGE), Department of Finance Canada
- Spring Economic Update 2026: Tax measures (Employee Ownership Trust Tax Exemption), Department of Finance Canada
- Legislation passes to implement measures from the Spring Economic Update 2026, Department of Finance Canada
- Line 12700: Capital gains, Canada Revenue Agency
Planning a sale? Talk to us before you sign anything.