The Proposed Change & Its Deferral
The plan was to increase the capital gains inclusion rate from ½ to ⅔, for capital gains over $250,000 annually for individuals, and for corporations & most trusts regardless of amount. Originally set to start June 25, 2024 under the NWMM (Notice of Ways & Means Motion). (canada.ca)
On January 31, 2025, Finance Canada announced a deferral of the effective date to January 1, 2026, and CRA reverted to administering the ½ inclusion rate for gains realized before that date. Forms and software have been adjusted accordingly. (canada.ca)
Then, in March 2025, the government cancelled the proposed increase altogether. As such, capital gains inclusion rate remains at ½ for all property dispositions to date, unless legislation imminently reintroduces the increase. (pwc.com)
Impact on Filers & Trusts
- Individuals: All capital gains realized through the end of 2025 remain taxed with the ½ inclusion rate. No need to adjust tax returns based on the higher ⅔ rate.
- Corporations & trusts: If some had followed earlier guidance using ⅔, CRA will coordinate corrective reassessments to revert the calculation to ½. (canada.ca)
- Lifetime Capital Gains Exemption (LCGE): The proposed increase to $1.25 million stays in force for eligible dispositions occurring on or after June 25, 2024, and indexation will resume in 2026. (canada.ca)
What Needs Action & What You Should Watch
- Double-check the inclusion rate used on Schedule 3 (capital gains) of your T1, or corporate T2 returns for 2024 & 2025. The rate should be ½, unless the exemption applies.
- Be aware of upcoming legislative signals: though the rate hike was cancelled, it could be reintroduced. So stay informed.
- For trusts, ensure Schedule 15 (beneficial ownership) filings are accurate—enhanced trust-reporting obligations remain in place for tax years ending December 31, 2023 and after. Bare trusts may be exempt unless CRA requests filing. (canada.ca)
Practical Scenario
Consider someone who sold stock worth $300,000 in gains in 2025:
- Under the ½ inclusion rate, $150,000 is taxable income from those gains.
- If the ⅔ had applied, $200,000 would have been taxable—so a larger tax hit. With cancellation, taxed more favorably.
Similarly, a corporation that previously over-applied the ⅔ rate may be notified of an adjustment.
Bottom Line
Even though the proposed inclusion rate change won’t take effect (unless reintroduced), the rules as of today mean capital gains remain measured and taxed under the current ½ inclusion rate. Filing correctly now means avoiding surprises—and ensuring correct withholding and reporting for individuals, trusts, and corporations alike.