Overview of the proposed changes
Starting January 1, 2026, Canada is proposing to increase the capital gains inclusion rate from one-half (50%) to two-thirds (≈66.67%) for:
- Individuals on gains realized in excess of $250,000 annually
- All gains realized by corporations and most trusts 🏢 (canada.ca)
Additionally, the Lifetime Capital Gains Exemption (LCGE) is expected to increase from $1,016,836 to $1,250,000. (canada.ca)
What this means in practical terms
| Scenario | Before Jan 1, 2026 | Proposed After Jan 1, 2026 |
|---|---|---|
| Individual with $300,000 capital gain | $300,000 × 50% taxed = $150,000 taxable gain | First $250,000 @ 50%, excess $50,000 @ 66.67% → $150,000 + $33,333 = $183,333 taxable gain |
| Corporation with $500,000 capital gain | 50% inclusion = $250,000 taxable gain | Entire gain at 66.67% inclusion = $333,333 taxable gain |
Actionable tax planning strategies
- Accelerate realized gains: If you anticipate sizable gains, consider realizing them before January 1, 2026, when the inclusion rate is still 50%.
- Use LCGE smartly: To the extent possible, structure dispositions to leverage the LCGE before it’s potentially diluted by higher inclusion rates.
- Consider corporate vs individual ownership: If operating through a corporation or trust, be aware those entities will lose advantage under the higher inclusion rule.
- Offset gains with losses: Harvesting capital losses before year end becomes more important when inclusion rates rise.
Key caveats and compliance notes
- The proposal is not yet law; legislation is expected to be introduced in Parliament. (canada.ca)
- Until the effective date, continue using the 50% inclusion rate for capital gains. CRA has confirmed administration will stay unchanged until January 1, 2026. (canada.ca)
- Tax software and CRA forms may not immediately reflect changes. Always confirm you’re using up-to-date tools and updated NWMM (Notice of Ways and Means Motion) where applicable.
Summary
This is a high-impact shift. If you expect large capital gains in 2026 or later, proactive planning—accelerating gains, using exemption limits, and offsetting losses—can make a large difference. Keep close watch for the formal legislative text, and plan now so you’re not caught off guard.