Tax Planning

Capital Gains Inclusion Rule & Business Owners: What’s New & What’s Not

Canada’s proposed changes to capital gains taxation and what was confirmed or rolled back, including the LCGE, inclusion rates, and entrepreneurial incentives.

By NomadicTax Research Team • 5-8 min read • March 20, 2026

## Overview of Capital Gains Proposals & Confirmations Budget 2024 proposed raising the **capital gains inclusion rate** from ½ to **2⁄3** for corporations and most trusts, and for individuals on gains over **$250,000 annually**. ([canada.ca](https://www.canada.ca/en/department-finance/news/2024/06/capital-gains-inclusion-rate.html?utm_source=openai)) Budget 2025 confirmed **not proceeding** with the inclusion rate changes for corporations or trusts, rolling back broader implementation. ([canada.ca](https://www.canada.ca/en/department-finance/services/publications/federal-tax-expenditures/2026/part-2.html?utm_source=openai)) However, the increase in the **Lifetime Capital Gains Exemption (LCGE)** to **$1.25 million** for eligible small business shares and farming/fishing property remains in place. ([canada.ca](https://www.canada.ca/en/department-finance/services/publications/federal-tax-expenditures/2026/part-2.html?utm_source=openai)) ## What This Means for Individuals & Entrepreneurs - Individuals still benefit from the higher LCGE, which helps reduce or eliminate capital gains tax when selling qualifying small businesses or farm/fishing properties. - Proposed inclusion rate increase (corporations/trusts) is **not being implemented** at this time. That reduces complexity for business owners relying on corporate or trust structures. - For individuals, the changes to inclusion rate over the threshold are also not proceeding under Budget 2025. So current inclusion rate rules generally continue. ([canada.ca](https://www.canada.ca/en/department-finance/services/publications/federal-tax-expenditures/2026/part-2.html?utm_source=openai)) ## Actionable Advice for Business Owners - If considering a sale of qualifying small business shares, evaluate whether eligibility for the LCGE is met: length of ownership, company status, qualified property. - Plan ahead for the year of disposition: coordinate with advisors to determine if timing or structuring could maximise exemptions. - Stay tuned to any revisions to Bill C-59 (or similar legislative proposals), which may affect deferral rules, stock option deductions, or other capital gains-related items. ## Example Scenarios - A farmer selling qualified farm property now benefits from the $1.25 million LCGE, reducing the taxable gain, regardless of proposed inclusion rate changes. - A business owner contemplating selling shares: because inclusion rate changes aren't proceeding, they need not factor in 2⁄3 inclusion unless future legislation reintroduces it. Instead, focus on ensuring the sale qualifies under existing exemption rules. ## Compliance & Monitoring - Keep up with CRA forms and guides related to Line 12700 (taxable capital gains), since the agency updates these to reflect enacted changes. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12700-capital-gains/whats-new-capital-gains.html?utm_source=openai)) - For tax software users, verify that LCGE limits match the new thresholds and that your calculations use confirmed rules. - Consult tax professionals especially for cross-jurisdictional or trust-based capital gains situations, as these are complex and potentially subject to future policy updates. ## Key Takeaway While many proposed changes to capital gains taxation have been paused or rolled back, the reinforcing of LCGE and confirmation of existing inclusion rates provide stability for personal planning. Those involved in private businesses or farms should plan around the confirmed exemptions — while staying alert for revived proposals.