Tax Planning
Tax Planning Tips: How to Handle the Increase in Capital Gains Inclusion Rate (Effective Jan 1, 2026)
With Canada's capital gains inclusion rate set to increase from one-half to two-thirds on many types of gains starting January 1, 2026, strategic planning can help individuals and corporations minimize impact.
By NomadicTax Research Team • 5-8 min read • March 19, 2026
## What’s Changing
Canada’s inclusion rate (the portion of capital gains that is taxable) is increasing from **50% to 66⅔%** for:
- Corporations and most trusts for all capital gains; and
- Individuals for capital gains realized above **$250,000** per year. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/businesses/small-businesses-self-employed-income/whats-new-small-businesses-self-employed.html?utm_source=openai))
The effective date of this new regime is **January 1, 2026**. Until then, the 50% inclusion rate continues to apply. ([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))
## Why It Matters
A higher inclusion rate means more taxable income from capital gains, increasing tax liability. For high net worth individuals, frequent traders, or owners of small businesses or farms, this can be a significant change. Planning ahead is critical.
## Key Tax Planning Strategies
1. **Accelerate Gains Realization Before 2026**
- If you expect large capital gains (e.g., from selling shares, real estate, or business assets), consider disposing before January 1, 2026 to benefit from the lower rate.
- But weigh this against potential market risks, and tax planning should align with overall financial goals.
2. **Track the $250,000 Threshold Wisely (Individuals)**
- If you can control timing or size of gains, aim to keep gains in 2026 and beyond below the $250,000 annual threshold.
- Estimate gains from 2025 and early 2026 to see whether staying below the threshold or splitting sales between family members can help.
3. **Use Lifetime Capital Gains Exemption (LCGE)**
- The LCGE has increased to **$1.25 million** for qualifying small business or farming/fishing property gains. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/businesses/small-businesses-self-employed-income/whats-new-small-businesses-self-employed.html?utm_source=openai))
- Combine exemption and threshold planning: where possible, use the LCGE first to shelter eligible gains.
4. **Prepare for Increased Form Complexity**
- The CRA has updated the “New for 2025” pages for capital gains and AMT changes. The forms and rules will reflect the inclusion rate changes. ([canada.ca](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12700-capital-gains/whats-new-capital-gains.html?utm_source=openai))
- Some forms (e.g., stock option calculations, small business share dispositions) may require new schedules or detailed tracking between periods before and after June 25, 2024. ([canada.ca](https://www.canada.ca/en/department-finance/news/2024/06/capital-gains-inclusion-rate.html?utm_source=openai))
## Corporate-Focused Planning
- Corporations realize all capital gains at the higher inclusion rate starting Jan 1, 2026. Plan share sales, restructuring, or asset realization accordingly before the cutoff if possible.
- Review eligible small business corporation shares or qualifying farm/fishing/fishing properties to ensure eligibility for LCGE or other incentives.
## Example Scenario
**Jane**, an individual, has realized $200,000 in capital gains in 2025 and expects another $100,000 in early 2026 (after Jan 1) from selling shares. Under the new rules:
- Jane’s **total** gains over $250,000 (here, $50,000) will be taxed at the two-thirds inclusion rate.
- The first $250,000 would remain effectively taxed at the old inclusion rate of 50%.
- If Jane holds sale until 2025 (before Jan 1), she could lock in the lower inclusion rate for more of the gains.
## Action Steps Today
- Review your portfolio now and forecast potential capital gains before January 1, 2026.
- Consult with tax advisors to estimate marginal tax increases under proposed inclusion rate.
- Decide whether to dispose business shares or property earlier.
- Maintain documentation for all eligible dispositions, especially small business or farm property, to support LCGE claims.
- Keep up with legislative updates: proposed changes may still be adjusted before final enactment.
**Bottom Line:** The increase in the inclusion rate significantly changes the capital gains tax landscape. Plan proactively, leverage thresholds and exemptions, and timing is everything.