2026 Capital Gains Inclusion Rate in Canada: What Has Actually Changed?

For months, Canadians have heard warnings about rising capital gains taxes.

Headlines suggested dramatic increases. Advisors debated planning windows. Investors rushed to crystallize gains. Family businesses questioned succession timelines.

So what actually changed in 2026?

If you own investments, rental property, or shares in a private company, this article will clarify:

• What the law says
• What did not change
• Where the real risk lies
• And how families with family-owned enterprises should think about capital gains going forward

As always, we return to the statute — not speculation.

 

What Is the Capital Gains Inclusion Rate?

In Canada, you are not taxed on 100% of a capital gain.

Under Income Tax Act (“ITA”) s.38(a), only a percentage of your capital gain is included in income. That percentage is called the inclusion rate.

Your taxable capital gain is then included in your income under ITA s.3(b), which forms part of the calculation of “taxable income.”

For decades, the inclusion rate has generally been:

50%

Meaning:

If you realize a $100,000 capital gain, only $50,000 is included in your income and taxed at your marginal rate.

 

What Was Proposed — and What Actually Happened

In 2024 and 2025, the federal government proposed increasing the capital gains inclusion rate for certain taxpayers.

The discussion centered on:

• Increasing the inclusion rate above 50%
• Applying a higher rate to individuals above a threshold
• Applying a higher rate to corporations and trusts

These proposals created uncertainty in the marketplace — particularly for:

• Owners planning to sell businesses
• Real estate investors
• Professionals holding passive portfolios

However, as of the 2026 filing season:

The general inclusion rate for individuals remains 50%.

The governing law remains ITA s.38.

There has been no across-the-board permanent increase to the inclusion rate for individual taxpayers filing their 2026 personal returns.

That is the current legal reality.

 

Where the Real Changes Occurred

While the general inclusion rate remains 50%, two areas matter:

1. Lifetime Capital Gains Exemption (LCGE) Increase

The Lifetime Capital Gains Exemption limit has increased to $1.25 million for eligible dispositions of:

• Qualified Small Business Corporation shares
• Qualified farm property
• Qualified fishing property

This is governed by ITA s.110.6.

For many family-owned enterprises, this increase is more significant than inclusion rate headlines.

Proper planning may allow an owner to shelter $1.25 million of capital gains entirely.

 

2. Alternative Minimum Tax (AMT) Expansion

While the inclusion rate remains 50%, the Alternative Minimum Tax rules have been expanded.

Certain preferential income — including capital gains — may trigger AMT in high-income situations.

This is governed under ITA s.127.5 and related provisions.

For high-net-worth individuals, this can create:

• Timing issues
• Cash flow strain
• AMT carryforward complexities

This is where planning matters most in 2026.

 

How Capital Gains Are Actually Calculated

Let’s simplify this.

If you sell an asset:

Step 1:
Proceeds of disposition

Step 2:
Minus Adjusted Cost Base (ACB)

Step 3:
Minus selling expenses

The result is your capital gain.

Under ITA s.38(a):

Taxable Capital Gain = 50% × Capital Gain

Under ITA s.3(b):

Taxable Capital Gain is added to your income and taxed at your marginal rate.

CRA explains this process in Guide T4037 – Capital Gains.

 

Why Inclusion Rate Discussions Still Matter

Even though the inclusion rate remains 50%, the political environment makes clear:

Capital gains taxation is a policy lever.

For families holding:

• Large investment portfolios
• Real estate portfolios
• Holding companies with retained earnings
• Shares in private corporations

You must assume that capital gains policy can evolve.

Strategic planning is not about reacting to headlines.
It is about building optionality.

 

Planning Considerations for Family-Owned Enterprises

If you own a private corporation, the inclusion rate interacts with:

• The Lifetime Capital Gains Exemption
• Safe income planning
• Post-mortem planning
• Estate freezes
• Intergenerational transfers

A 50% inclusion rate today does not eliminate:

• TOSI considerations
• Section 84.1 planning
• Section 55 exposure
• AMT implications

In sophisticated planning, the inclusion rate is only one variable.

The real objective is:

Preserve capital.
Preserve optionality.
Preserve generational wealth.

 

Common Misunderstandings in 2026

“Capital gains are now taxed at 100%.”
False.

“Everyone’s capital gains tax doubled.”
False.

“There is no planning opportunity anymore.”
False.

What has changed is the seriousness with which families must approach planning.

 

What Should You Do Before Filing Your 2026 Return?

If you realized capital gains in 2025:

1. Confirm your adjusted cost base is correct.
2. Review whether losses can be applied.
3. Evaluate AMT exposure.
4. Consider whether future crystallization strategies make sense.
5. If selling a business, confirm LCGE qualification under ITA s.110.6.

CRA Guide T4037 provides the mechanical reporting requirements.

The planning, however, is not mechanical.

 

Final Thoughts

The 2026 capital gains inclusion rate has not fundamentally changed for individuals. The general rate remains 50% under ITA s.38.

What has changed is:

• The exemption landscape
• AMT exposure
• Political sensitivity
• The importance of disciplined planning

For families with family-owned enterprises, capital gains are not simply tax events.

They are inflection points.

And inflection points require strategy.

At Shajani CPA, we advise with one principle in mind:

Tell us your ambitions, and we will guide you there.

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2026 Shajani CPA.

Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning service.