Tax Planning
Preparing for Capital Gains Changes: Tax Planning Ahead of 2026 in Canada
Proposed changes to capital gains inclusion rates in Canada take effect January 1, 2026. With rising thresholds and exemptions, there are windows for planning now to reduce tax burdens.
By NomadicTax Research Team • 5-8 min read • November 22, 2025
## What the Capital Gains Inclusion Rate Proposal Means
Beginning **January 1, 2026**, Canada plans to increase the proportion of capital gains subject to tax for individuals and trusts in certain cases. Here’s a breakdown:
- For individuals: capital gains **above $250,000 annually** will see inclusion increase from **50% to 66.67%**.
- For corporations and most trusts: **all capital gains** will be taxed at the higher inclusion rate.
- Note: This change is **not yet in force**, but forms and CRA systems are being adjusted to reflect the current 50% rate until then. ([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))
## Larger Lifetime Capital Gains Exemption (LCGE)
The LCGE has been raised to **$1.25 million**, effective **June 25, 2024**, for eligible small business shares and farming/fishing properties. This gives more breathing room for those who qualify. ([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))
## Planning Strategies Before the Change Hits
- **Time your dispositions**: For individuals with large capital gains, disposing assets in **2025** rather than after January 1, 2026 keeps a portion of gains subject to only 50% inclusion.
- **Maximize exemptions**: Use the $1.25 million LCGE amount up while it applies to your eligible assets. If you foresee gains above that, start planning to segment assets or qualify eligible small business shares earlier.
- **Trust structuring**: If you're using trusts or have family trusts, consider their future tax exposure under the higher inclusion rate. Adjust distributions accordingly.
## Examples
- *Investor A* has $300,000 in capital gains in 2025: the first $250,000 are taxed at 50% inclusion; the excess $50,000 still under 50%. Post-January 1, 2026, all $300,000 would have been taxed at 66.67%.
- *Farmer B* expecting income from a farm sale: If eligible for LCGE and meets small business shares or farm conditions, the first $1.25 million in eligible gains are excluded, even with inclusion rate changing. Plan asset sales accordingly.
## Practical Checkpoints for Investors and Business Owners
- Review your asset portfolio now: projected sales next year, eligible exemptions.
- Confirm whether your assets qualify under LCGE criteria.
- Consult your accountant or advisor about trusts and how gains will be distributed—timing matters.
- Keep detailed cost basis records—capital gains are often questioned when documentation isn’t robust.
These capital gains changes signal a shift toward taxing wealthier individuals and entities more heavily. But with early action and strategic planning, Canadians can control exposure and keep more of what they earn—or sell.