Capital Gains
A capital gain arises when you sell a capital property — such as stocks, mutual funds, ETFs, real estate (other than your principal residence), or cryptocurrency — for more than its adjusted cost base (ACB). In Canada, the taxable portion of the gain is determined by the inclusion rate and added to your income for the year.
The current inclusion rate is **50% flat** for all individual capital gains. For every $1,000 of capital gain, $500 is added to your taxable income and taxed at your marginal rate. The previous government's proposal to raise the inclusion rate to 66.67% on gains above $250,000 was **deferred indefinitely on 21 March 2025** by the Carney government, so the 50% flat rate applies to all years 2024 onward.
Capital losses can offset capital gains in the current year, be carried back 3 years, or carried forward indefinitely. Your principal residence is generally exempt from capital gains tax through the Principal Residence Exemption. Selling investments in a TFSA or RRSP does not trigger capital gains.
Related Terms
Inclusion Rate
The inclusion rate determines what portion of a capital gain is included in your taxable income.
ACB (Adjusted Cost Base)
The Adjusted Cost Base (ACB) is the cost of an asset for tax purposes, used to calculate capital gains or losses when the asset is sold.
Principal Residence Exemption
The Principal Residence Exemption allows you to eliminate all or part of the capital gain when you sell your home, provided you designate it as your principal residence for each year you owned it.
LCGE (Lifetime Capital Gains Exemption)
The Lifetime Capital Gains Exemption allows qualifying Canadians to shelter up to $1,250,000 (2025) of capital gains from the sale of qualifying small business corporation (QSBC) shares, qualified farm property, or qualified fishing property.