Inclusion Rate
The inclusion rate determines what portion of a capital gain is included in your taxable income. For individuals in 2025, the inclusion rate is 50% on the first $250,000 of annual net capital gains, and 66.67% (two-thirds) on gains exceeding $250,000. For corporations and trusts, the 66.67% rate applies from the first dollar.
At a 50% inclusion rate, a $10,000 capital gain results in $5,000 being added to your taxable income. If your marginal rate is 40%, you'd pay $2,000 in tax on that gain — an effective tax rate of 20% on the gain itself. This preferential treatment makes capital gains one of the most tax-efficient forms of investment income.
The inclusion rate has changed over time — it was 75% before 2000 and has been 50% since. The 2024 federal budget introduced the tiered system with the higher rate above $250,000 for individuals. Understanding the inclusion rate is essential for planning asset sales, particularly large real estate or business dispositions.
Related Terms
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).
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.
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.