Capital Gains Tax in Canada: A Plain-Language Guide

What Is a Capital Gain?

For property held on capital account in a non-registered account:

Capital gain = Proceeds of disposition − Adjusted cost base (ACB) − Selling expenses

Proceeds are generally the sale price; a deemed disposition may use fair market value. ACB includes acquisition cost and applicable adjustments. Keep trade confirmations: box 20 of the T5008 does not necessarily equal your tax ACB. Reinvested distributions, returns of capital and foreign-currency transactions may require adjustments. See the CRA’s T5008 explanation.

A sale, gift or exchange may be a disposition. Securities and cryptocurrency transactions are not always on capital account: they may be business income depending on the facts. This article does not classify your individual activity.

The General Inclusion Rate Is 50%

As checked October 19, 2026, section 38 of the Income Tax Act generally includes half a capital gain. The federal Spring Economic Update 2026 confirms that the proposed increase was cancelled; it should no longer be described as merely deferred or uncertain.

The inclusion rate is not a tax rate. The taxable portion enters the income calculation; actual tax depends on federal and provincial or territorial brackets, deductions and credits, among other factors.

Exceptions: the principal residence exemption and some gifts can change the result. A direct gift of certain listed securities to a qualified donee can qualify for a zero inclusion rate under conditions; selling first and donating cash does not have the same treatment. Benefits received and flow-through shares have special rules. See the CRA’s P113 guide; reporting duties and alternative minimum tax require separate checking.

Capital Losses: General Rule and Exceptions

An ordinary capital loss generally offsets capital gains. A net capital loss can usually be carried back three years or forward indefinitely. Some property categories have separate restrictions. Source: the CRA’s T4037 guide, 2025 edition.

This is not an absolute ban on deducting losses against other income: a qualifying allowable business investment loss (ABIL) can have that treatment. Special rules also exist at death and for certain older losses.

Superficial Loss: Check Both Conditions

The CRA describes a superficial loss where both conditions are met:

1. You or an affiliated person acquires, or obtains a right to acquire, the same or identical property between 30 days before and 30 days after the sale.
2. You or an affiliated person still owns the substituted property, or has a right to acquire it, 30 days after the sale.

“Affiliated” is a specific tax concept, not simply “family member”; a spouse or common-law partner is one example. The affected loss is not immediately deductible, and adding it to the substituted property’s ACB is not always possible. Repurchases in registered accounts need particular care.

Principal Residence: Exemption and Reporting

A qualifying home may receive a full or partial exemption. Since 2016, the disposition and designation must be reported even when the entire gain is exempt, generally on Schedule 3 and Form T2091(IND). Designated years and rental or business use matter. See the CRA’s principal residence rules.

TFSA, RRSP and FHSA: Different Tax Treatments

A TFSA is generally exempt in Canada, with exceptions including business income and non-qualified or prohibited investments. An RRSP generally defers tax until taxable withdrawals. A qualifying FHSA withdrawal is tax-free; an ordinary non-qualifying withdrawal is generally taxable. “No tax under any circumstances” would therefore be misleading.

Frequently asked questions