Inclusion Rate
The inclusion rate determines what portion of a capital gain is included in your taxable income. For individuals, the inclusion rate is **50% flat** on all capital gains regardless of the amount. The same 50% rate applies to corporations and trusts.
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 been 50% since 2000 (it was 75% before then). The 2024 federal budget proposed a tiered system that would have raised the inclusion rate to 66.67% on individual gains above $250,000 and on all corporate/trust gains, but the **Carney government deferred this change indefinitely on 21 March 2025**. The flat 50% rate therefore continues to apply for 2024, 2025, and 2026.
How it works
The inclusion rate is applied per disposition and then totalled for the year on Schedule 3 — every taxable sale, gift, or deemed disposition gets the same 50% treatment before the results are combined into a single figure added to your income. The flat 50% rate applies identically whether the gain was realized by an individual, a corporation, or a trust, which keeps the rules simple even though the entities are taxed very differently overall.
The rate hasn't always been 50%: it was 75% before 2000, then dropped to today's 50%. The 2024 federal budget proposed raising it to 66.67% on individual gains above $250,000 and on all corporate and trust gains. The Department of Finance deferred the change's effective date to 1 January 2026 on 31 January 2025, and then the Carney government cancelled the increase outright on 21 March 2025 — so 50% has applied to every year from 2024 onward, and the one-half inclusion rate is the enacted rate.
The 50% inclusion rate is the core reason capital gains are taxed more lightly than employment income, interest, or most other income types, which are all included at 100%. It's a deliberate policy choice to encourage investment and risk-taking, and it's what makes tax-loss harvesting and gain-deferral strategies worthwhile in the first place.
Example: Salary versus capital gain on the same $10,000
If you earned an extra $10,000 in salary at a 40% marginal rate, the full $10,000 is included in income, so you'd owe $4,000 in tax on it.
If instead you realized a $10,000 capital gain at the same 40% marginal rate, only $5,000 (50%) is included in income, so you'd owe $2,000 in tax — half the tax bill on the identical dollar amount.
Frequently asked questions
Is the inclusion rate the same for corporations as for individuals?
Yes, currently — the flat 50% inclusion rate applies equally to individuals, corporations, and trusts, though a proposed tiered system would have treated them differently before it was cancelled.
Could the inclusion rate change again in the future?
The 2024 proposal to raise the rate to 66.67% above certain thresholds was cancelled by the government on 21 March 2025, after an earlier deferral of its effective date. As with any tax rule, a future government could propose a change again, but there is no pending or deferred increase on the books.
Does the inclusion rate apply to the sale of my principal residence?
Generally not in practice — the Principal Residence Exemption typically eliminates the entire gain on a qualifying home before the inclusion rate would even come into play.
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 $1,275,000 (2026, up from $1,250,000 in 2025) of capital gains from the sale of qualifying small business corporation (QSBC) shares, qualified farm property, or qualified fishing property.