Canada capital gains tax: inclusion rate (50% / 2/3 above $250k from 2024), lifetime capital gains exemption (LCGE), principal residence exemption, adjusted cost base. Trigger on: "Canada capital gains tax", "CRA capital gains", "inclusion rate Canada", "sell shares Canada", "T5008", "adjusted cost base Canada", "LCGE Canada", "principal residence exemption Canada", "capital gains inclusion rate 2/3", "sell small business shares Canada". For non-residents see ca-nonresident-cgt.
Source-cited draft.Written from sources but not reviewed by a licensed practitioner, so it may be incomplete or wrong. General reference only; don't file or take a position on it without professional review.
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Every figure is drawn from this Tax Guide and cited to its source.
Quick reference
| Item | Value | |---|---| | Capital gains inclusion rate | **50%** of gain included in income for individuals, corporations, and trusts | | Proposed 66.67% increase | Cancelled March 21, 2025; no $250,000 higher-rate threshold applies | | Federal top marginal rate on included gain | ~26.8% (50% inclusion × 53.53% top rate) | | LCGE — small business shares (2025) | $1,250,000 lifetime exemption | | LCGE — farming/fishing property | $1,250,000 | | Principal residence | Fully exempt (one per family unit per year) | | Form | Schedule 3 (T1 return) | | Legislation | ITA §38–§55 |
Proposed increase cancellation
The proposed increase to a 2/3 (66.67%) capital-gains inclusion rate was cancelled on March 21, 2025. Current law remains a 50% inclusion rate for capital gains of individuals, corporations, and trusts. No $250,000 higher-inclusion threshold or 2024 split-period calculation applies.
Capital gain formula
Capital gain = Proceeds of disposition − ACB − Outlays and expenses
ACB definition
ACB = original purchase price + costs of acquisition + capital improvements. For identical properties (e.g. shares of same class): ACB is averaged across all units.
Principal residence exemption
A property that is the taxpayer's principal residence for each year of ownership is fully exempt from capital gains tax.
One designation per family unit
Only one property per family unit (taxpayer, spouse/common-law, minor children) can be designated as principal residence for any given year.
Proration for mixed use and +1 formula
For years it was both a principal residence and a rental: the exemption is prorated. The +1 formula provides a year of grace for the year of purchase.
Quick reference
| Item | Value |
|---|---|
| Capital gains inclusion rate | 50% of gain included in income for individuals, corporations, and trusts |
| Proposed 66.67% increase | Cancelled March 21, 2025; no $250,000 higher-rate threshold applies |
| Federal top marginal rate on included gain | ~26.8% (50% inclusion × 53.53% top rate) |
| LCGE — small business shares (2025) | $1,250,000 lifetime exemption |
| LCGE — farming/fishing property | $1,250,000 |
| Principal residence | Fully exempt (one per family unit per year) |
| Form | Schedule 3 (T1 return) |
| Legislation | ITA §38–§55 |
Track ACB meticulously — errors are common and CRA audits ACB claims.
Working paper only. The 2024 inclusion rate change requires split-period calculations for the 2024 tax year. LCGE eligibility requires detailed analysis of the QSBC conditions. Have a qualified Canadian CPA review before filing.
Other Canada computations in the OpenAccountants Tax Library.
Filing requirement on sale
File CRA Form T2091 on sale to designate.
LCGE eligible property
Individuals resident in Canada can claim the LCGE to shelter gains on: 1. Qualified Small Business Corporation (QSBC) shares — company must be a Canadian-controlled private corporation (CCPC); all/substantially all (90%) assets used in active business in Canada 2. Qualified farm property or qualified fishing property
2025 LCGE limit
$1,250,000
LCGE cumulative limit
The LCGE is a cumulative lifetime limit — once used up, no further exemption available.
Capital losses offset capital gains only
Capital losses can only offset capital gains (not other income)
Carryback and carryforward
Net capital losses carry back 3 years and carry forward indefinitely
Superficial loss rule
Superficial loss rule: loss disallowed if same property acquired within 30 days before or after the sale by the taxpayer or an affiliated person
Combined federal + provincial rates on included gain
Capital gains are included in income and taxed at combined federal + provincial rates. Top combined rates on the 2/3 portion (above $250k): approximately 26%–27% federal + 13%–17% provincial = ~39%–44% combined effective rate on the included 2/3.
Rendered from the canonical facts model. General reference only — confirm with a qualified professional before acting.
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