Capital Gains Inclusion Rate in Canada: What Actually Happened — and What It Means for You Today
For 11 months between June 2024 and April 2025, Canadian investors made tax decisions based on a capital gains inclusion rate change that was never formally enacted. Some triggered gains early to beat the higher rate. Some withheld more tax than required. Now that Prime Minister Carney has cancelled the proposed hike entirely, the inclusion rate stays at 50% — the same as it has been since October 2000. Here is the full story of what happened, what survived the reversal, and what you should actually do today.
Meet the investor this article is about
Tariq, 58, is a professional in Vancouver. In September 2024, panicking about the proposed 2/3 inclusion rate, he sold a rental property and triggered a $520,000 capital gain he had been deferring for years. His accountant filed his 2024 return applying the 2/3 rate on gains above $250,000, paying roughly $29,000 more in tax than necessary under the 50% rate. That refund is now being processed — and Tariq wants to know what to do with the next real-estate decision, now that the rules have settled back into the status quo.
The Current State: 50% Inclusion, No Changes
Canada's capital gains inclusion rate is 50%. Every dollar of realized capital gain is half-taxable — the other half is permanently tax-free. This applies equally to:
Individual taxpayers
Any amount of capital gain. No $250,000 threshold. Sell $10,000 of shares or $10M — the same 50% inclusion rate applies to both.
Corporations & trusts
All capital gains in CCPCs, private corporations, and trusts flow through at the 50% inclusion rate. The other 50% is added to the Capital Dividend Account for tax-free distributions.
One thing did change — and it stuck
The Lifetime Capital Gains Exemption (LCGE) was raised from $1,016,836 to $1,250,000 effective June 25, 2024, on qualified small business corporation shares and farming/fishing property. The Carney reversal of the broader inclusion-rate hike did NOT undo this. The higher LCGE remains in place — a real, permanent win for business owners and farmers.
How We Got Here — The 11-Month Saga
Budget 2024 announcement
Finance Minister Chrystia Freeland proposes raising the capital gains inclusion rate from 50% to 66.67% (2/3), applicable to corporations and trusts on all gains, and to individuals on gains above $250,000 annually. Effective date: June 25, 2024.
New rate 'takes effect'
The 2/3 inclusion rate applies for tax purposes via a Notice of Ways and Means Motion — but the enabling legislation is never formally passed. Many taxpayers and accountants apply the new rate defensively.
Implementation deferred
Finance deferred the effective date from June 25, 2024 to January 1, 2026, following the change in Liberal leadership. Gains realized in 2024-2025 revert to the 50% inclusion rate.
Carney cancels the hike entirely
Prime Minister Mark Carney announces the proposed increase is cancelled — not deferred, cancelled. Canada's capital gains inclusion rate stays at 50% going forward. The Lifetime Capital Gains Exemption increase to $1.25M (enacted separately in the 2024 budget) is maintained.
Status: 50% inclusion rate continues
All capital gains in Canada — personal or corporate, any amount — are taxed with a 50% inclusion rate. Only the LCGE increase to $1,250,000 on qualified small business shares and farm/fishing property remains from the 2024 budget package.
What the Cancellation Saved You
Compares the current 50% inclusion rate against the rejected proposal (50% on first $250K of annual gains, 66.67% on excess). The difference is what you would have paid under the cancelled hike.
Tax owed today (50% rate)
$86,000
Would have owed (2/3 rate)
$96,750
Savings from cancellation
$10,750
For individuals, the rejected proposal kept the 50% inclusion for the first $250,000 of annual gains and would have applied 66.67% only above that threshold. For corporations and most trusts, 66.67% would have applied to all gains.
What This Means for Your Planning Today
With the rate stable at 50%, most of the defensive maneuvers taxpayers made in 2024-2025 can unwind. Five concrete takeaways:
If you triggered gains early in 2024 to beat the hike — check for reassessment
If you filed your 2024 return applying the 2/3 rate defensively, you may be entitled to a reassessment refund. Many accountants are now adjusting returns proactively. Confirm with yours.
Stop deferring for the wrong reason
Planning decisions made on the assumption that 2/3 inclusion was coming (e.g., accelerating sales, delaying purchases) should be revisited. The math reverts to normal.
The LCGE at $1.25M is a real win for business owners
If you own QSBC shares or farm/fishing property, the lifetime exemption is now $233,164 higher than in 2023. A well-planned exit on qualifying shares can save an owner over $50,000 at the top marginal rate.
Corporate class funds and CDA planning still matter
For CCPC owners, the 50% of capital gains that flow into the Capital Dividend Account for tax-free distribution remain the most powerful long-term tax-planning tool. The CDA benefit is untouched.
Watch for future political shifts
Capital gains inclusion rate has moved before (50% pre-1988, 66.67% or 75% from 1988-2000, 50% since 2000). No rule change is permanent. Keep plans tax-efficient but flexible.
The Bottom Line
For Tariq: his accountant should file a T1 adjustment request for 2024 applying the 50% inclusion rate to his $520,000 gain. The resulting refund will unwind most of the $29,000 in defensive overpayment. Going forward, the rule is simple — capital gains are taxed exactly as they have been for a generation, at a 50% inclusion rate. Plan around long-term tax efficiency, not short-term political headlines.
TFSA, RRSP, capital gains — see the full picture