Tax Planning
Smart Capital Gains Planning under Canada’s New Inclusion Rate Rules
With inclusion rates changing nationwide starting mid-2024 and further measures in Budget 2025, investors and business owners need to reassess how and when they realise gains to minimise their tax liability.
By NomadicTax Research Team • 5-8 min read • April 1, 2026
## Overview of Canada’s Capital Gains Changes
In **Budget 2024**, the Canadian federal government introduced changes to the capital gains inclusion rate. Effective **June 25, 2024**, the rate increased from **½ (50%)** to **⅔ (66.6667%)** on:
- All capital gains earned by corporations and most types of trusts.
- For individuals, the portion of taxable capital gains **above \$250,000** per year. Gains under that threshold remain at 50% inclusion. ([canada.ca](https://www.canada.ca/en/department-finance/news/2024/06/capital-gains-inclusion-rate.html?utm_source=openai))
Simultaneously, the **Lifetime Capital Gains Exemption (LCGE)** for qualified small business corporation shares and farm or fishing property was raised to **\$1.25 million**. ([canada.ca](https://www.canada.ca/content/dam/fin/publications/taxexp-depfisc/2026/taxexp-depfisc-26-eng.pdf?utm_source=openai))
## Key Implications and Where Planning Matters
- **Threshold management**: If you're an individual with capital gains likely to cross \$250,000, consider timing sales in years where thresholds or inclusion rate changes may allow more gains taxed at 50% vs 66.67%.
- **LCGE Strategy**: Using up LCGE before changes takes full effect (gains occurring after June 24, 2024) can preserve more tax-free benefit. Don’t overshoot gains subject to higher inclusion.
- **Trusts and Corporations**: Since they don’t benefit from the \$250,000 threshold, gains are included at the higher rate post-June 25, 2024. For assets held in trusts, alignment of fiscal periods, and sale timing can make notable differences.
## Practical Examples
- Alice sells \$300,000 in qualified small business shares in 2025. On the first \$250,000, inclusion rate is 50%, meaning taxable capital gain of \$125,000. On the extra \$50,000, inclusion is 66.67%, adding \$33,333. Total taxable gain: \$158,333. Versus if all at 50%, it would've been \$150,000. That higher inclusion bites.
- Bob owns shares via a trust. He should anticipate all gains on trust-held assets larger than implementation date will increase tax burden due to inclusion rate change. If he can shift ownership out of trust or restructure, there could be savings.
## Actionable Insights for Capital Gains Planning
- Keep track of **realization dates and fiscal year-ends**: Gains realized before June 25, 2024 follow old rules. Draw up projections to see gains crossing thresholds.
- Review portfolios for **low vs high-growth assets**: Deferring sales until after LCGE-eligible disposal rules allows captures of gains preferentially where assets qualify.
- Use **allowable business investment losses and stock option benefits** carefully: their deduction rates align to inclusion rates, which might reduce offsets under new rules. ([canada.ca](https://www.canada.ca/en/department-finance/news/2024/06/capital-gains-inclusion-rate.html?utm_source=openai))
## Summary
These capital gains reforms shift more burden to the higher end of gains and reduce the preferential treatment of lower gains or small business investments. By being mindful of thresholds, timing, entity type, and exemption usage, taxpayers can manage the impact. Your best play is to forecast your capital gains for upcoming years and craft a plan that takes advantage of remaining favorable rates or exemptions.