Lifetime Capital Gains Exemption Calculator

Calculate the $1,275,000 (2026) LCGE on QSBC shares or qualified farm or fishing property. Handles a CNIL balance and prior-year usage — and the alternative minimum tax a large claim triggers.

Your LCGE calculator

Property type

Realized capital gain

LCGE claimed in prior years

CNIL balance

Other income this year

Province

Tax year

$120,940 saved with LCGE (regular tax, before AMT)

Without the exemption, tax on this gain would have been $121,167.

LCGE limit (2026)	$1,275,000
Exemption room left (after prior usage)	$1,275,000
Realized gain	$500,000
Exempt portion	$500,000
Taxable portion	$0
Taxable capital gain (50% inclusion)	$0
Tax owed (regular rules)	$227
Estimated federal AMT on this claim	$0

Remaining LCGE for future use: $775,000

The LCGE is not exempt from the alternative minimum tax

Under ITA s.127.52(1) the AMT calculation includes capital gains at 100% (not 50%) and allows the s.110.6 capital gains deduction at only 7/5 of the amount claimed. A fully sheltered gain therefore leaves 30% of itself inside adjusted taxable income, taxed at the 20.5% minimum rate above the AMT exemption (the bottom of the 4th federal bracket). A maximum LCGE claim with little other income produces roughly $40,000 of federal AMT in the year of sale (2026 parameters).

On these inputs regular federal tax of $14,620 already exceeds the minimum amount, so no AMT is payable. AMT paid is not lost — it carries forward for 7 years against regular federal tax in later years. Provincial minimum tax (levied as a percentage of the federal figure in most provinces, and separately in Quebec) is not modelled here. Check the AMT calculator for the full picture including donations and dividends.

How the LCGE works

The LCGE under ITA s.110.6 is a lifetime, cumulative cap on the capital gains a Canadian resident can claim as exempt on dispositions of qualifying property. The 2026 limit is $1,275,000 ($1,250,000 for 2025), raised from $1,016,836 by the 2024 Federal Budget. Unlike the inclusion-rate proposal that was scrapped in 2025, the LCGE increase was retained.

"Exempt" does not mean "no tax" — watch the AMT

The LCGE removes the gain from taxable income under the regular rules. It does not remove it from the alternative minimum tax base. ITA s.127.52(1) rebuilds adjusted taxable income with the capital gains inclusion fraction read as 1/1 — a full 100% of the gain — while the s.110.6(2)/(2.1) deduction is taken at 7/5 of the amount claimed. Because the deduction only scales by 7/5 while the inclusion doubles, 30% of a fully sheltered gain stays in adjusted taxable income.

On a maximum $1,275,000 claim that leaves about $382,500 of adjusted taxable income. After the AMT exemption — the bottom of the 4th federal bracket, which the 2023 AMT reform adopted — and the flat 20.5% minimum rate, a seller with little other income in the year faces roughly $40,000 of federal AMT, plus provincial minimum tax in most provinces. The calculator above estimates the federal figure for your inputs.

AMT is a prepayment, not a penalty: the excess carries forward for seven years and can be recovered against regular federal tax in any of those years in which regular tax exceeds the minimum amount. That recovery is only worth something if you have enough regular tax in the following seven years, which is exactly what a business owner who has just sold the business often does not. Planning moves — realizing the gain over two years with a capital gains reserve, timing other income into the year of sale, or crystallizing part of the exemption earlier — are worth pricing before the disposition, not after.

How a CNIL balance limits the year's claim

Cumulative Net Investment Loss is a balance that runs since 1988, tracking the excess of cumulative investment expenses over cumulative investment income. Interest on investment loans, net rental losses, and certain other investment-related expenses build up the CNIL; interest income, dividends, and net rental income deplete it. A positive balance reduces the capital gains deduction you can claim in the disposition year by the CNIL amount — the deduction is the taxable 50% share of the exempt gain, so more gain than the CNIL itself loses the exemption that year — but it does not use up the lifetime limit; the room stays for a later year. Many taxpayers are surprised by their CNIL balance only at the moment they need to claim the LCGE — checking CRA My Account well before a planned sale is the safest approach.

QSBC share qualification tests

Three tests must be met at the moment of the share disposition:

• CCPC status: the corporation must be a Canadian-Controlled Private Corporation
• Active business asset test: 90% or more of the corporation's assets must be used in active business carried on primarily in Canada
• 24-month look-back test: the same active-business condition (here 50%, not 90%) must have held continuously for the 24 months preceding the sale

Holding companies, investment companies, and corporations with significant cash or passive investment balances frequently fail one of these tests at sale. Pre-sale "purification" (extracting passive assets via dividends before the sale) is a common planning move.

Related decisions

If you are realizing a QSBC gain near the LCGE limit, the Tax-Loss Selling Calculator can help you offset the taxable portion above the exemption with realized losses from public-market securities. See the 2026 Capital Gains overview for the current inclusion rate that drives the taxable portion.

Frequently asked questions

What is the Lifetime Capital Gains Exemption (LCGE) in 2026?

The LCGE is a lifetime cap on capital gains that can be claimed exempt on the sale of Qualified Small Business Corporation (QSBC) shares or qualified farm or fishing property. The 2026 limit is $1,275,000 ($1,250,000 for 2025, raised from $1,016,836 by the 2024 Federal Budget, effective 2024-06-25 and retained after the inclusion-rate scrap on 2025-03-21; indexation resumed in 2026). The exemption is claimed on Schedule 3 with Form T657.

Does the LCGE trigger alternative minimum tax?

Often, yes — and this is the single most expensive thing people miss about it. ITA s.127.52(1) computes adjusted taxable income with capital gains included at 100% rather than 50%, and allows the s.110.6 capital gains deduction at only 7/5 of the amount claimed. A fully sheltered gain therefore leaves 30% of itself inside adjusted taxable income. On a maximum $1,275,000 claim that is about $382,500 of adjusted taxable income, which after the AMT exemption (the bottom of the 4th federal bracket) and the 20.5% minimum rate produces roughly $40,000 of federal AMT in the year of sale when the gain is the only income, which leaves no regular tax at all. The deduction also does not take the gain out of net income: it comes off only in computing taxable income, so with other income the whole taxable gain still phases out the federal basic personal amount (ITA s.118(1.1)). AMT paid carries forward for 7 years against regular federal tax; provincial minimum tax applies on top in most provinces.

What is CNIL and how does it affect my LCGE?

Cumulative Net Investment Loss (CNIL) is the running total by which your cumulative investment expenses (e.g., interest on investment loans, rental losses) have exceeded your cumulative investment income (interest, dividends, net rental income) since 1988. A positive CNIL balance limits the capital gains deduction you can claim in the year, not your lifetime limit: Form T657 subtracts it from your cumulative eligible taxable capital gains, so at the 50% inclusion rate each dollar of CNIL keeps 2 dollars of gain from being exempt that year. With a $50,000 CNIL, $400,000 of a $500,000 QSBC gain is exempt in 2026; the other $875,000 of the $1,275,000 limit stays available for a later year, for example once investment income has worked the CNIL off.

Are QSBC shares the same as any private company shares?

No. To qualify for the LCGE, shares must meet three tests at the time of sale: (1) Canadian-Controlled Private Corporation status, (2) at least 90% of assets used in an active business in Canada at sale, and (3) the same 50%-active-business test continuously for the 24 months before the sale. Holding companies and corporations with significant passive assets typically fail one of these tests.