Tax Planning
How to Leverage Canada’s Upcoming Capital Gains Changes in Your Tax Planning
With the Canadian government delaying the capital gains inclusion rate increase until 2026, there’s a critical window for taxpayers to strategize before the change kicks in.
By NomadicTax Research Team • 5-8 min read • November 20, 2025
## Overview of Capital Gains Changes
Starting **January 1, 2026**, Canada plans to increase the capital gains inclusion rate:
- For **individuals**, only gains above **$250,000 annually** will be taxed at the new **two-thirds inclusion rate**. ([canada.ca](https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2025/update-cra-administration-proposed-capital-gains-taxation-changes.html?utm_source=openai))
- For **corporations and most trusts**, **all capital gains** will be taxed at two-thirds. ([canada.ca](https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2025/update-cra-administration-proposed-capital-gains-taxation-changes.html?utm_source=openai))
- The **Lifetime Capital Gains Exemption (LCGE)** limit has been raised to **$1.25 million** for eligible small business, farming, and fishing properties. ([canada.ca](https://www.canada.ca/en/department-finance/news/2025/01/government-of-canada-announces-deferral-in-implementation-of-change-to-capital-gains-inclusion-rate.html?utm_source=openai))
## Tax Planning Strategies Before the New Rate Effective Date
| Focus Area | Actionable Advice | Example |
|---|---|---|
| **Timing of Dispositions** | Realize capital gains **before January 1, 2026** to use the current one-half inclusion rate. | Sell appreciated secondary property in late 2025 rather than in 2026. |
| **Use LCGE Efficiently** | Maximize use of the $1.25 million exemption on small business shares and farm/fishing assets—especially for those approaching that threshold. | A farmer with a $1.2 million eligible capital gain can shelter nearly all of it under LCGE. |
| **Entrepreneurial Incentive** | A new incentive will reduce the inclusion rate to **one-third** on up to **$2 million** in eligible capital gains for entrepreneurs, fully rolled out by 2029. Planning business exits or reorganizations now may align better under that incentive. ([canada.ca](https://www.canada.ca/en/department-finance/news/2025/01/government-of-canada-announces-deferral-in-implementation-of-change-to-capital-gains-inclusion-rate.html?utm_source=openai)) |
## Risks and Considerations
- If you wait until **2026 or later**, gains above thresholds will face a heavier rate.
- Corporate and trust structures may face broader exposure—earlier planning with corporate counsel or tax advisors is essential.
- Keep up with legislation—laws may adjust during consultation periods.
## Practical Moves
- Use year-end to review portfolios and decide what to sell now vs. later.
- Talk with financial and tax advisors about moving eligible interests into structures that might benefit from LCGE or entrepreneurial measures.
- For business owners, consider exits (e.g., sales or share transfers) in 2025 if beneficiary thresholds allow.
## Conclusion
The deferral to **January 1, 2026** gives taxpayers a strategic window to make tactical dispositions and organize their assets. For entrepreneurs, the rising LCGE and new incentives offer opportunities—if you plan in time. Now’s the moment to weigh your gains, forecast exposures, and possibly accelerate actions before the heavier tax rate impacts take effect.