What Was Proposed & What Changed
- In September 2024, the Department of Finance announced a change: for individuals and trusts, the inclusion rate for capital gains exceeding $250,000 annually would increase from 1/2 to 2/3, and for corporations and certain trusts all gains would adopt the 2/3 rate. Effective date was originally June 25, 2024, but deferred to January 1, 2026. (canada.ca)
- However, later, elements of this increase have been cancelled or reversed, meaning that several entities will not face the higher inclusion rate at all. (canada.ca)
Who is Actually Affected Now
- Individuals and trusts: only those realizing capital gains above $250,000 annually are impacted by the proposed increase effective January 1, 2026. Below that threshold, the current inclusion rate of 50% continues. (canada.ca)
- Corporations and “most types of trusts”: as originally proposed, all capital gains will be subject to the two-thirds inclusion rate starting January 1, 2026. But with recent cancellations, some corporations/trusts may no longer be impacted. (canada.ca)
Strategic Implications & Planning Opportunities
- If you're planning to sell a capital asset or realize gains, doing so before January 1, 2026 may lock in the lower 50% inclusion rate if you're going to cross the $250,000 threshold.
- Trusts and corporations should review expected gains; strategies could include shifting the timing of dispositions, using tax-loss harvesting before the effective date.
- For small-scale investors below the $250,000 threshold, the effect is minimal. But for those selling large portfolios or high value assets, this change may significantly increase tax bills.
Example
- Investor A holds shares whose sale in 2026 will trigger a $300,000 capital gain.
- Under current rules (through end 2025), they include 50% of that, meaning $150,000 is taxable.
- Under proposed rules from Jan 1, 2026, they’d include 2/3, or ~$200,000 taxable income—raising tax payable on gains by ~$50,000 multiplied by their marginal rate.
Things to Watch & Compliance Tips
- Keep detailed records of cost base, acquisition and disposition dates.
- Estimate your gains ahead of time to understand if you’ll cross the thresholds.
- Check current legislation to see which corporations/trusts changes apply to—some proposals have been cancelled.
Final Thoughts
While the capital gains changes were proposed and delayed, the partial cancellations make for a mixed landscape. Investors should track their potential exposure and take proactive action before the new rates kick in—if they ever fully will.