Overview of the 2026 Capital Gains Changes
Canada plans to increase the inclusion rate for capital gains from one-half to two-thirds for:
- Individuals on capital gains in excess of $250,000 annually, and
- All capital gains realized by corporations and most trusts.
These changes will be effective for dispositions occurring on or after January 1, 2026.(canada.ca)
In addition, certain exemptions and thresholds will shift: the Lifetime Capital Gains Exemption (LCGE) limit will rise to $1.25 million effective June 25, 2024, and a new Canadian Entrepreneurs’ Incentive will apply.(canada.ca)
Key Strategies for Tax Planning
1. Time Your Dispositions
If you expect large capital gains and can delay a sale, consider disposing before January 1, 2026, to take advantage of the current inclusion rate (50%).
2. Use the $250,000 Annual Threshold Wisely
Individuals with modest gains (below $250,000) will continue benefitting from the one-half rate. If you expect gains near that threshold, structuring sales or trades over multiple years could reduce overall exposure.(canada.ca)
3. Leverage the Increased LCGE and Entrepreneurs’ Incentive
If eligible for LCGE (for farming, fishing, and small business share disposals), the higher exemption ($1.25 million) offers more room before gains get heavily taxed. The Entrepreneurs’ Incentive further lowers the inclusion rate to one-third on certain lifetime gains. Plan your investments and ownership structure to maximize these.(canada.ca)
4. Corporate & Trust Structuring
Corporations and trusts will lose the one-half rate across all gains. If you control business shares or trust interests, review whether distributions, timing, or restructuring can shift tax burdens or retain benefits. Consider whether winding down or reorganizing assets before the new inclusion rate might be advantageous.
Practical Examples
| Situation | Without Planning | With Planning |
|---|---|---|
| Individual sells $300,000 in capital property | Gains taxed at two-thirds over $250,000 threshold, significantly increasing tax owing after 2025 | Selling part in 2025; rest in 2026 to stay under threshold, using LCGE where applicable |
| Entrepreneur with small business shares | After January 1 gains taxed at higher inclusion rate | Use Entrepreneurs’ Incentive and ensure eligible property qualifies to reduce inclusion rate to one-third |
| Trust owning appreciated real estate | Full corporate/trust inclusion rate after 2025 | Explore distributing appreciated asset to beneficiaries who may benefit personally |
Actionable Checklist Before January 2026
- Audit your portfolio of capital assets (shares, property, QSBCs, etc.) and estimate potential gains
- Confirm whether you meet LCGE or Entrepreneurs’ Incentive eligibility criteria
- Talk to your accountant about whether split dispositions or gifting can help
- If disposing property, consider closing deals in 2025 where feasible
- Update estate plans and trust agreements in light of new rules
Bottomline: The inclusion rate increase represents one of the most substantial changes to capital gains taxation in Canada recently. Strategic planning in the next few months can save thousands in tax, particularly for individuals, entrepreneurs, and trusts expecting high gains.