Canada's capital gains inclusion rate — the proportion of a capital gain included in taxable income — underwent a significant change effective June 25, 2024. For the first time since 2000, the rate was increased for gains above a new annual threshold, affecting individuals with large annual capital gains, corporations, and trusts. Understanding the new rules is critical for investors, business owners planning asset sales, and estate planners. Run the numbers with our capital gains calculator.
Prior to June 25, 2024, all capital gains in Canada were subject to a 50% inclusion rate — meaning half of your capital gain was included in taxable income. The tax was calculated at your marginal rate on the included amount. We recommend working with our strategic tax planning team.
For gains realized on or after June 25, 2024:
| Taxpayer Type | Gains Up To $250K/yr | Gains Over $250K/yr |
|---|---|---|
| Individuals | 50% inclusion | 66.67% inclusion |
| Corporations | 66.67% (all gains) | 66.67% (all gains) |
| Most trusts | 66.67% (all gains) | 66.67% (all gains) |
| Graduated rate estates (GREs) | 50% inclusion | 66.67% inclusion |
The $250,000 individual threshold is a per-year, per-person limit — it does not stack with a spouse's threshold, and it resets each calendar year. Capital losses carried forward from prior years reduce the gains subject to the threshold.
In Alberta, the top combined federal-provincial marginal income tax rate is approximately 48%. Here is how the new inclusion rate affects tax on a $500,000 capital gain realized after June 25, 2024:
| Portion of Gain | Inclusion Rate | Taxable Amount | Approx. Tax @ 48% |
|---|---|---|---|
| First $250,000 | 50% | $125,000 | $60,000 |
| Next $250,000 | 66.67% | $166,667 | $80,000 |
| Total | $291,667 | $140,000 |
Under the old 50% inclusion rate, the same $500,000 gain would have produced approximately $120,000 in tax. The increase is $20,000 — representing the higher inclusion rate on the upper $250,000.
The proposed two-thirds inclusion rate would have applied to all corporate capital gains without any threshold — a meaningful increase for holding companies and family-owned corporations. However, this increase was cancelled and never took effect; corporate capital gains remain at the 50% inclusion rate.
For corporations, the after-tax proceeds on asset sales are reduced, which affects the amount available to distribute to shareholders. It also affects the calculation of the Capital Dividend Account (CDA) — corporations can still pay tax-free capital dividends equal to the non-taxable portion of capital gains (now one-third, down from one-half).
The change has prompted a range of planning discussions among tax advisors. Key considerations include:
When the increase was originally proposed for June 25, 2024, taxpayers were briefly told they might need to split 2024 gains across two periods. After the increase was cancelled, the 50% inclusion rate applies to the full year and no two-tier split is required.
The capital gains inclusion rate increase requires revisiting asset sale timelines, corporate structures, and estate plans. Our Calgary tax consultants work with investors, business owners, and families to model the after-tax impact of planned dispositions and identify structuring opportunities that minimize the impact of the higher inclusion rate. Contact us for a review of your capital assets and tax planning strategy.
