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. Gains sheltered by the LCGE are completely excluded from taxable income.
To use the LCGE on QSBC shares, the corporation must meet strict criteria: it must be a Canadian-controlled private corporation (CCPC), at least 90% of assets must be used in active business in Canada at the time of sale, and more than 50% of assets must have been used in active business throughout the 24 months before the sale.
The LCGE is a lifetime cumulative limit tracked against the exemption amount in effect for the year of disposition — once you've used the full amount available in the year you claim (up to $1,275,000 for 2026), any further qualifying gains are taxable at the normal inclusion rate. The exemption is indexed to inflation and has increased significantly over the years. Proper tax planning around the LCGE can save hundreds of thousands of dollars for business owners and farmers.
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).
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.