Canada taxes capital gains at half the rate of regular income — on paper. In practice, how you earn those gains determines which rate actually applies to you. For investors who buy and hold, the capital gains rules are straightforward and generous. For active day traders, those rules often don’t apply at all.
Here’s exactly how capital gains tax works in Canada in 2026, and how to tell which treatment applies to your situation.
What Is Capital Gains Tax in Canada?
A capital gain occurs when you sell a capital property — stocks, real estate, mutual funds, ETFs, or cryptocurrency — for more than you paid for it. The profit is the capital gain.
In Canada, only a portion of that gain is included in your taxable income. That portion is called the capital gains inclusion rate. In 2026, the inclusion rate for individuals is 50% — meaning half of your capital gain is added to your income and taxed at your marginal rate.
Example: You sell shares for a $10,000 profit. Your capital gain is $10,000. Under the 50% inclusion rate, $5,000 is added to your taxable income. If your marginal tax rate is 40%, you pay $2,000 in tax — an effective rate of 20% on the full gain.
Capital Gains Tax Rates in Canada (2026)
Canada has no single “capital gains tax rate.” The tax you pay depends on:
- The inclusion rate: 50% of your gain is taxable (for individuals)
- Your marginal tax rate: Combined federal + provincial rate on your total taxable income
Federal marginal rates (2026):
| Taxable Income | Federal Rate |
|---|---|
| Up to $57,375 | 15% |
| $57,375–$114,750 | 20.5% |
| $114,750–$158,519 | 26% |
| $158,519–$220,000 | 29% |
| Over $220,000 | 33% |
Provincial rates add 6–21% depending on province. Combined, top marginal rates range from approximately 46% (Alberta) to 54% (Nova Scotia and Quebec at the very top).
Effective capital gains tax rate at the top bracket:
– 50% inclusion rate × ~53% combined rate = ~26.5% effective rate on the full gain
The Capital Gains Inclusion Rate: What Changed in 2024
The federal government proposed increasing the capital gains inclusion rate to 66.67% (two-thirds) for gains over $250,000 per year for individuals. As of 2026, this proposal has faced delays and legal challenges. Confirm the current rate with a tax professional or check the CRA’s Capital Gains guide before filing.
At the time of writing, the 50% inclusion rate remains in effect for most individual investors.
Capital Gains Tax vs. Business Income: The Day Trading Distinction
The most important tax question for Canadian investors who trade actively: does your trading qualify for capital gains treatment?
Capital gains treatment applies when:
– You buy securities with the intent to hold and benefit from long-term appreciation or income
– Your trading is infrequent and not your primary income source
– You hold positions for months or years
Business income treatment applies when:
– You trade frequently (daily, weekly) with the intent to profit from short-term price movements
– You devote significant time and expertise to trading
– You use leverage to increase trading positions
For most active day traders, the CRA classifies profits as business income — 100% taxable at the marginal rate. A capital gains treatment is not available when the CRA determines you’re carrying on a business.
The practical difference is significant:
– $30,000 in capital gains at a 40% marginal rate: $6,000 in tax (50% × $30,000 × 40%)
– $30,000 in business income at a 40% marginal rate: $12,000 in tax (100% × $30,000 × 40%)
For the full explanation of how the CRA classifies day trading income, see our guide to day trading taxes in Canada.
How to Calculate Capital Gains Tax in Canada
Calculating capital gains tax in Canada involves four steps:
Step 1: Calculate your proceeds of disposition. The amount you received from selling the asset.
Step 2: Calculate your adjusted cost base (ACB). Your original purchase price, plus any costs associated with acquiring the asset (commissions, fees). In Canada, you must calculate ACB using the average cost method — if you bought the same stock at different prices, your ACB is the average of all purchases weighted by quantity.
Step 3: Subtract outlays and expenses. Selling commissions and related costs reduce your capital gain.
Step 4: Apply the inclusion rate. Multiply the resulting capital gain by 50% to get the taxable capital gain. Add this to your total income and apply your marginal rate.
Formula:
Taxable Capital Gain = (Proceeds − ACB − Expenses) × 50%
Capital Gains Calculator Example:
| Amount | |
|---|---|
| Sale price | $50,000 |
| Adjusted cost base | $35,000 |
| Selling commissions | $250 |
| Capital gain | $14,750 |
| Taxable amount (50% inclusion) | $7,375 |
| Tax owing at 43% marginal rate | $3,171 |
Capital Gains Tax on Specific Asset Types
Stocks and ETFs: Standard capital gains rules apply for investors. Day traders are reclassified as business income.
Cryptocurrency: The CRA treats cryptocurrency as a commodity, not currency. Gains on crypto held for investment are capital gains; gains from frequent crypto trading are business income. The CRA has been increasingly active in auditing crypto investors.
Real estate: Your principal residence is exempt from capital gains tax (the principal residence exemption). Rental properties and cottages are subject to capital gains tax on sale.
Foreign investments: Gains on foreign stocks must be reported in CAD, converting at the Bank of Canada rate at the time of the transaction.
Capital Losses: How They Work
If you sell a capital property for less than your ACB, you have a capital loss. Capital losses can only be applied against capital gains — they can’t offset employment income or other non-capital income.
Capital loss rules:
– Apply current-year capital losses against current-year capital gains first
– Unused capital losses can be carried back 3 years to recover past capital gains taxes paid
– Unused capital losses can be carried forward indefinitely to offset future capital gains
Superficial loss rule: If you sell a security at a loss and repurchase the same or identical security within 30 days (before or after the sale), the CRA disallows the loss. The disallowed loss is added to your ACB of the repurchased security. This rule prevents artificial loss harvesting.
Capital Gains in a TFSA or RRSP
Capital gains earned inside a TFSA are completely tax-free — you don’t report them and they don’t affect your inclusion rate calculation. TFSA withdrawals are also tax-free.
Capital gains earned inside an RRSP are tax-deferred — you don’t pay tax until you withdraw funds, at which point the entire withdrawal is taxed as income (not at the capital gains rate).
In both cases, the capital gains inclusion rate is irrelevant because the gains are sheltered while inside the account. The tax advantages are most powerful for long-term buy-and-hold strategies. Active day trading in registered accounts creates CRA reassessment risk (see our day trading rules guide).
Frequently Asked Questions
What is the capital gains tax rate in Canada in 2026?
Canada doesn’t have a single capital gains tax rate. Only 50% of a capital gain is included in taxable income, and that 50% is taxed at your marginal rate. Effective capital gains tax rates range from about 7.5% to roughly 27% depending on income level and province.
Do I pay capital gains tax on stocks in Canada?
Yes, if you sell stocks for a profit. If you’re a long-term investor, 50% of the gain is taxable. If the CRA classifies you as a day trader or business income earner, 100% of profits may be taxable.
What is the capital gains inclusion rate in Canada?
The inclusion rate for individuals is 50% — meaning half of your capital gain is added to taxable income. The federal government proposed increasing this to 66.67% in 2024; verify the current rate with the CRA or a tax professional.
Can I avoid capital gains tax in Canada?
Not legally — if you’ve realised a gain, it’s taxable. Strategies to manage capital gains tax include: holding investments inside a TFSA (gains are fully tax-free), harvesting capital losses to offset gains, and timing dispositions across tax years to manage income.
How do I report capital gains on my tax return?
Report capital gains on Schedule 3 — Capital Gains (or Losses) of your T1 General tax return. The net taxable capital gain from Schedule 3 flows to line 12700 of your T1.
