The capital gains inclusion rate increase was cancelled — one-half still applies
Reviewed by EverStone CPA · August 2026
The proposed increase in the capital gains inclusion rate from one-half to two-thirds was deferred and then cancelled. It never took effect. Capital gains continue to be included in income at one-half.
How it works
When you sell something for more than you paid, the profit is a capital gain. Tax is not charged on the whole gain — only on a fraction of it, called the inclusion rate. That fraction is included in your income and taxed at your ordinary rate.
The inclusion rate is one-half. On a $100,000 gain, $50,000 is added to your income and taxed; the other $50,000 is not taxed at all.
In the 2024 federal budget the government proposed raising the rate to two-thirds. That proposal was deferred in January 2025 and then cancelled outright in March 2025. It never took effect, and the one-half rate applied throughout.
How it applies to you
This affects anyone who sells an asset at a profit outside a registered account: shares, a rental property, a cottage, a business, or equipment held by a corporation.
It does not affect your principal residence if it qualifies for the principal residence exemption, and it does not affect gains inside a TFSA or RRSP, which have their own treatment.
The practical consequence of the cancellation is that planning done in 2024 in anticipation of a higher rate — accelerating a sale, triggering a gain early — was based on a rule that never arrived. If you acted on it, the transaction still stands and its tax consequences are real.
How to calculate it
To find the taxable portion of a capital gain:
| Step | Detail |
|---|---|
| Take the proceeds of sale | what you sold it for |
| Subtract the adjusted cost base | broadly, what you paid plus costs of acquiring it |
| Subtract the costs of selling | commissions, legal fees |
| The result is your capital gain | |
| Multiply by the inclusion rate | one-half |
| That is the amount added to your income | taxed at your marginal rate |
Worked through: sell shares for $250,000 that you bought for $100,000, with $5,000 of selling costs. The gain is $250,000 − $100,000 − $5,000 = $145,000. At the one-half inclusion rate, $72,500 is added to your income for the year. The remaining $72,500 is not taxed.
What changed
The increase was announced in the 2024 federal budget, deferred on 31 January 2025 to 1 January 2026, and then cancelled on 21 March 2025. No version of it ever came into force.
What to do
The one-half inclusion rate is the rule. The increase was announced, deferred and cancelled, and no version of it ever applied.
One part of the same package was kept: the lifetime capital gains exemption increase to $1.25 million. Two measures announced together met different fates, which is exactly why "announced" and "in force" are worth distinguishing.
Before triggering a large gain deliberately, the timing matters more than the rate — spreading a sale across two tax years can keep more of it in lower brackets.
The practical point. If a 2024 or 2025 transaction was planned, reported or accrued on the assumption of a two-thirds inclusion rate, it should be revisited. Some returns were filed during the period when the increase was still expected.
The terms used on this page
- Capital gain
- The profit when you sell an asset for more than its adjusted cost base.
- Inclusion rate
- The fraction of a capital gain that is included in taxable income. One-half.
- Adjusted cost base
- Broadly what you paid for an asset, plus the costs of acquiring it and certain later adjustments.
- Marginal rate
- The rate of tax on your next dollar of income, which is what a capital gain is taxed at once included.
Where this comes from
Every figure on this page is taken from the source below, not from interpretation:
- Prime Minister of Canada — cancellation announcement, 21 March 2025
- Department of Finance — deferral announcement, 31 January 2025
General information, not tax advice. This page explains a change in general terms. It cannot account for your circumstances and does not create a professional relationship. Confirm anything that affects a decision — book a free consult.