Capital gains inclusion rate: still one-half — the proposed increase was cancelled and never took effect
An inclusion rate matters most in the year of a sale, and the planning that changes the number happens before it. Advisory work is where that conversation belongs.
Quick answer: 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
Selling something for more than you paid gives a capital gain. Only a fraction of the gain, the inclusion rate, is added to 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.
Because of the cancellation, planning done in 2024 for a higher rate — accelerating a sale, triggering a gain early — rested on a rule that never arrived. Any transaction you made stands, with real tax consequences.
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.
Common questions about capital gains inclusion rate: still one-half
Do I still pay tax on half my capital gain?+
I filed a return assuming the higher rate. What now?+
How much of a $145,000 gain is taxed?+
Does this affect the lifetime capital gains exemption?+
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 — send an enquiry.
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