Tax Guide
Capital Gains Tax in Canada
2025: What Changed & What You Owe
The 2024 federal budget raised capital gains inclusion rates for the first time in decades. Here's exactly what changed, who it affects, and how to calculate what you actually owe.
1. What changed in 2024
Before June 25, 2024, 50% of capital gains were included in your taxable income — this was called the inclusion rate. The 2024 federal budget raised this for many Canadians.
2. Who is affected
- People selling investment properties
- Business owners selling their company
- Investors with large non-registered portfolios
- Corporations with investment income
- Cottage / vacation property owners
- Anyone with gains over $250k in one year
- Investors with gains under $250k/year
- TFSA or RRSP investors (no capital gains tax inside registered accounts)
- Primary residence sellers (full exemption still applies)
- Canadians with only employment income
- Small investors with occasional stock sales
3. How to calculate your capital gains tax
Capital gains tax is not a flat tax. Here's the step-by-step process:
Step 1: Calculate your capital gain — the sale price minus your adjusted cost base (what you paid, plus any capital improvements).
Step 2: Apply the inclusion rate — 50% for the first $250,000 (individuals), 2/3 on the amount above $250,000. This gives you your taxable capital gain.
Step 3: Add the taxable capital gain to your other income for the year. It is then taxed at your marginal income tax rate — not a special capital gains rate.
| Province | Top marginal rate on income | Max rate on capital gains (above $250k) |
|---|---|---|
| Ontario | 53.53% | 35.7% |
| British Columbia | 53.50% | 35.7% |
| Alberta | 48.00% | 32.0% |
| Quebec | 53.75% | 35.8% |
| Manitoba | 50.40% | 33.6% |
| Saskatchewan | 47.50% | 31.7% |
| Nova Scotia | 54.00% | 36.0% |
4. Real examples with numbers
5. Important exemptions
Principal Residence Exemption
If the property you're selling was your principal residence for every year you owned it, the entire capital gain is tax-free — no matter how large. This is one of the most valuable tax shelters in Canada and was not changed by the 2024 budget.
Lifetime Capital Gains Exemption (LCGE)
If you sell shares of a qualified small business corporation or a qualified farm or fishing property, you may be eligible for the Lifetime Capital Gains Exemption. The LCGE limit for 2025 is $1,250,000 for small business shares (up from $1,016,602 in 2023). This exemption shelters a significant portion of those gains from tax entirely.
6. Year-end planning tips
Consider timing your gains across multiple years
If you're planning to sell an asset with a large gain, consider whether you can spread the sale across two tax years to keep each year under the $250,000 threshold. This keeps you at the 50% inclusion rate on all your gains.
Use capital losses to offset gains
Capital losses can be used to offset capital gains in the same year, or carried back 3 years or forward indefinitely. If you have losing investments in your non-registered account, selling them before year-end can reduce your net capital gains.
Contribute to TFSA or RRSP first
If you have room, holding growth investments inside a TFSA (best for long-term) or RRSP shelters all capital gains from tax entirely. Every dollar of gains earned inside a TFSA is tax-free forever.
Calculate your capital gains tax
Our Capital Gains Tax Calculator is coming soon — it will calculate your exact tax owed based on your gain, province, other income, and whether the $250,000 threshold applies.
Capital Gains Calculator →