Tax Planning
Planning for Capital Gains: How Canada’s Inclusion Rate Shift Affects You
A shift in how Canada taxes capital gains—from one-half to two-thirds inclusion for many—brings strategic planning opportunities and pitfalls for investors and business owners.
By NomadicTax Research Team • 5-8 min read • April 5, 2026
## What’s Changing with Capital Gains
Since **Budget 2024**, Canada has proposed and partially implemented changes to the **capital gains inclusion rate**:
- For **corporations and most trusts**, **all capital gains** will be **included at two-thirds** instead of one-half;
- For **individuals**, gains **above $250,000 annually** will be taxed at two-thirds, while gains below that threshold remain at one-half.
These changes apply to **dispositions occurring on or after June 25, 2024**. ([canada.ca](https://www.canada.ca/en/department-finance/news/2024/06/capital-gains-inclusion-rate.html?utm_source=openai))
## Who is Most Affected?
- High-net-worth individuals or those with **large capital gains** from investments, real estate (not primary residence), or business sales;
- Corporations and trusts holding assets whose gains will now fully face the higher inclusion rate;
- Investors using **net capital losses** from past years—these must now be applied with adjustment factors depending on when the loss was incurred. ([canada.ca](https://www.canada.ca/en/department-finance/news/2024/06/capital-gains-inclusion-rate.html?utm_source=openai))
## Strategies to Adapt
- **Time your dispositions**: If possible, schedule asset sales or dispositions before thresholds or changes affect you. Gains realized before June 25, 2024 may still benefit from the one-half rate.
- **Use Lifetime Capital Gains Exemption (LCGE)**: The LCGE has increased to \$1.25 million for qualified small business shares/farming and fishing property. It offsets taxable capital gains under both inclusion rate regimes. ([canada.ca](https://www.canada.ca/en/department-finance/news/2024/06/capital-gains-inclusion-rate.html?utm_source=openai))
- **Leverage allowable business investment losses cautiously**: Losses realized under different inclusion rate regimes may yield different offset values; careful record keeping is essential.
- **Revisit estate and trust planning**: Trusts and estates should review how capital gains flowing to beneficiaries are treated, and how thresholds apply.
## Example
Imagine *Ben*, a Canadian investor who realizes \$400,000 in capital gains in 2025. The first \$250,000 is taxed at the one-half inclusion rate (taxable: \$125,000), and the remaining \$150,000 at two-thirds (taxable: \$100,000) under the new rules. If Ben has \$80,000 net capital losses from prior years incurred under the old regime, he'll need to adjust how those losses apply using the CRA’s “adjustment factors” to reduce his overall tax burden. ([canada.ca](https://www.canada.ca/en/department-finance/news/2024/06/capital-gains-inclusion-rate.html?utm_source=openai))
## Action Steps for Investors
1. **Keep detailed records** of gains/losses by date—it determines which inclusion rate and which adjustment factors apply.
2. **Consult with tax advisors** before large asset sales or business exits to assess timing under the inclusive / reduced regime.
3. **Utilize tax-advantaged vehicles**—LCGE, registered plans where gains are sheltered, and properly structured corporations or trusts.
4. **Avoid surprise withholding**: Non-residents disposing of taxable Canadian property may face higher withholding rates (up to 35%) as required under new inclusion rates. ([canada.ca](https://www.canada.ca/en/department-finance/news/2024/06/capital-gains-inclusion-rate.html?utm_source=openai))
## Why Investors Need to React Now
- These changes are now law for many gains and will impact tax owing starting with the 2025 tax year.
- Improper timing or missing details can mean paying significantly more tax.
- Strategic planning before legislative or regulatory adjustments can yield meaningful savings.
**Category**: Tax Planning
**taxHome**: Canada
**author**: NomadicTax Research Team
**readTime**: 5-8 min
**published**: true