Canada’s Capital Gains Inclusion Rate: What Changed and Why It Matters #
Canada doesn’t tax Capital Gains the way most people think. You don’t pay tax on the full gain. You pay tax on a percentage of the gain, and that percentage is the inclusion rate.
For years, the inclusion rate was 50%. If you sold an investment property and made $100,000, only $50,000 of that gain counted as taxable income. You’d pay tax on the $50,000 at your marginal rate, not on the full $100,000. Simple enough.
That changed in 2024. The first $250,000 of Capital Gains in a year still uses the 50% inclusion rate. But anything above $250,000 now gets hit with a 67% inclusion rate. This is a big deal if you sell a business, liquidate a large investment position, or realize significant crypto gains in a single year.
Here’s what it looks like in practice. You sell a rental property and make $400,000. The first $250,000 gets included at 50%, so that’s $125,000 of taxable income. The remaining $150,000 gets included at 67%, which is $100,500. Your total taxable income from that sale is $225,500 instead of the $200,000 it would have been under the old rules.
Same gain. Higher tax bill once you cross that $250,000 line.
This threshold resets every year. If you realize $200,000 in gains this year and $200,000 next year, you stay at the 50% inclusion rate for both years. But if you realize $400,000 in a single year, you’re over the threshold and the higher rate kicks in.
The change hits hardest on large one-time events. Business owners selling their companies. Real Estate investors liquidating portfolios. Anyone exiting a concentrated position they’ve held for decades. You can’t avoid the tax, but you can structure when and how you trigger it.
Timing matters now more than it used to. Spreading a large gain across multiple years can keep you under the $250,000 threshold. Using corporate structures to hold appreciating assets changes how the gain gets taxed. Planning around the Capital Gains exemption for qualified small business shares becomes more valuable. These aren’t tricks. They’re legal ways to organize when you realize gains.
For Canadians with significant assets, this is where wealth management becomes more than just picking investments. You need someone thinking about the tax implications of when you sell, how you hold different assets, and whether corporate or trust structures make sense given the new rules.
The lifetime Capital Gains exemption still exists for qualified farm property, fishing property, and small business corporation shares. That exemption is around $1 million now (indexed annually). If you qualify, you can shelter that amount entirely. But once you’ve used it, you’re subject to the inclusion rates like everyone else.
Crypto adds another layer. If you’re sitting on substantial crypto gains and you’re thinking about selling, the inclusion rate change means you’re paying more tax on anything above $250,000 in a single year. This is where something like a Section 85 rollover starts making sense. You can move crypto into a corporation at cost, defer the gain, and manage when you actually trigger the taxable event. The paperwork matters. The timing matters. But the structure can keep you from handing over a bigger chunk to the CRA than you need to.
Digital Wealth Partners handles investment advisory for Canadian clients who need fiduciary-level guidance that accounts for cross-border tax implications. For families dealing with significant capital events where structure and timing make a real difference in the tax outcome, Digital Ascension Group provides Family Office services that coordinate with your Canadian tax advisors to plan around these rules.
Structure matters more now because the penalty for not planning is higher. You’re not evading tax. You’re organizing your financial life so you don’t pay more than the law requires.
Contact Digital Ascension Group to learn how our Family Office services can coordinate your complete financial picture.
