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The Canadian government has announced yet another chapter of significant changes to the capital gains inclusion rate, impacting taxpayers across the country.
New Effective Date: January 1, 2026
The government has confirmed that the proposed increase in the capital gains inclusion rate will now take effect on January 1, 2026, if passed by parliament. This means:
- Until December 31, 2025, the current one-half inclusion rate will remain in effect.
- Starting January 1, 2026, the inclusion rate will increase to two-thirds on capital gains exceeding $250,000 annually for individuals and on all capital gains for corporations and most trusts.
CRA Reverts to Current Inclusion Rate
As a result of this update, the Canada Revenue Agency (CRA) will continue to administer the existing one-half inclusion rate until the new effective date. This ensures that all capital gains realized before January 1, 2026, will be taxed under the current rate unless an exemption applies.
Lifetime Capital Gains Exemption (LCGE) Remains on Track
The government has reaffirmed that the proposed increase to the Lifetime Capital Gains Exemption (LCGE) limit to $1.25 million will take effect as planned. This change applies to dispositions occurring on or after June 25, 2024, with indexation resuming in 2026.
What This Means for You:
Individuals & Trusts
- The CRA will issue updated forms reflecting the one-half inclusion rate in the coming weeks.
Relief will be granted for late-filing penalties and arrears interest until:
- June 2, 2025, for T1 Individual filers.
- May 1, 2025, for T3 Trust filers.
The CRA is working to update its systems and forms as quickly as possible to allow for timely reporting.
Corporations
- Corporations can continue filing using the one-half inclusion rate until further notice.
- For those who filed under the guidance of the September 23, 2024, Notice of Ways and Means Motion (NWMM), the CRA will coordinate corrective reassessments to reverse any premature application of the two-thirds inclusion rate.
Next Steps:
We will continue monitoring updates from the Department of Finance and CRA and will keep you informed of any further developments. If you have questions about how these changes may impact you, please don’t hesitate to reach out.
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