WealthCapital Gains Tax in Canada: A Plain-Language Guide
What Is a Capital Gain?
A capital gain is calculated as:
Capital gain = Proceeds of disposition − Adjusted Cost Base (ACB) − Outlays and expenses
The proceeds of disposition is what you receive when you sell (or the fair market value if you gift the asset). The adjusted cost base (ACB) is what you originally paid, including acquisition costs like brokerage commissions. Outlays and expenses include selling commissions and legal fees. For more on calculating ACB, see our article on adjusted cost base in Canada.
A capital gain is triggered by a disposition: selling, gifting, trading one cryptocurrency for another, or a deemed disposition at death or when you emigrate from Canada. It is not triggered inside registered accounts (TFSA, RRSP, FHSA).
| Capital gain realized | Taxable portion (50%) | Estimated tax at 30% marginal rate |
|---|---|---|
| $10,000 | $5,000 | ~$1,500 |
| $50,000 | $25,000 | ~$7,500 |
| Current inclusion rate | 2024 budget proposal (deferred, status uncertain) | |
|---|---|---|
| Rate | 50% | 66.67% |
| Applies to | All individual capital gains | Individual capital gains above $250,000 per year |
The Inclusion Rate: Only Half Is Taxable
Canada applies a 50% inclusion rate to capital gains: only half of your gain is added to your taxable income for the year. The other half is tax-free. This is what makes capital gains more tax-efficient than ordinary income (employment income, interest) which is taxable at 100%.
| Capital gain realized | Taxable portion (50%) | Estimated tax at 30% marginal rate |
|---|---|---|
| $10,000 | $5,000 | ~$1,500 |
| $50,000 | $25,000 | ~$7,500 |
Important — 2024 federal budget proposal: The federal government proposed raising the inclusion rate to 66.67% on individual capital gains above $250,000 per year. This proposal was deferred and its status remains uncertain. Do not assume it is in force — confirm the current inclusion rate directly with the CRA (guide T4037) before any significant transaction.
Your Marginal Rate: The Other Half of the Equation
Once the taxable portion is determined, it’s added to your income and taxed at your marginal rate — the combined federal and provincial rate that applies to the top slice of your income. This rate varies by province and total income. To understand how different types of investment income are taxed, see our guide on how investment income is taxed in Canada.
Capital Losses: How to Use Them
If you sell at a loss, you have a capital loss. Capital losses can only offset capital gains, not ordinary income. You can:
- Apply them against gains in the current year;
- Carry them back up to 3 prior tax years;
- Carry them forward indefinitely.
Watch out for the superficial loss rule: if you sell a security at a loss and you (or an affiliated person) repurchases the same or identical security within 30 days before or after the sale, the loss is denied. This rule prevents artificial loss harvesting. To use losses strategically within CRA rules, read our guide on tax-loss harvesting in Canada.
The Principal Residence Exemption
The gain on the sale of your principal residence is generally exempt from tax through the principal residence exemption. Specific rules apply — including what qualifies as a principal residence and how designation years work. For details, see our article on the principal residence exemption in Canada.
Registered account (TFSA / RRSP / FHSA)
- No capital gains tax applies
- Investments grow tax-free (TFSA) or tax-deferred (RRSP/FHSA)
- One of the biggest advantages these accounts offer Canadian investors
Non-registered account
- Every disposition — sale, gift, or crypto-to-crypto trade — can trigger a capital gain or loss
- Must be reported to the CRA
Capital Gains and Registered Accounts
Inside a TFSA, an RRSP, or an FHSA, no capital gains tax applies. Investments grow tax-free (TFSA) or tax-deferred (RRSP/FHSA). This is one of the biggest advantages these accounts offer Canadian investors.
In a non-registered account, however, every disposition — sale, gift, or crypto-to-crypto trade — can trigger a capital gain or loss that must be reported to the CRA.
🧮 Calculator: tax on a capital gain
In Canada, 50% of a capital gain is taxable, then added to your income.
Rough estimate for information only — not tax advice.
Frequently asked questions
What’s the difference between the marginal rate and the inclusion rate?
The inclusion rate (50%) determines what fraction of your gain gets added to your income. The marginal rate is the tax rate applied to that fraction, based on your federal and provincial income bracket. Example: $10,000 gain × 50% inclusion = $5,000 taxable; at a 40% marginal rate = $2,000 actual tax.
Are capital gains inside my TFSA taxable?
No. Any gain realized inside a TFSA is completely tax-free and does not need to be reported on your tax return. This is one of the primary advantages of the Tax-Free Savings Account.
How do I find my adjusted cost base (ACB)?
For brokerage-held securities, trade confirmation slips and T5008 slips can help. For ETFs and stocks bought in multiple lots, you need to calculate a weighted average cost. A portfolio tracker like WealthWise can help you centralize this data across accounts.
What happens to my capital gains when I die?
At death, the CRA treats you as having disposed of most of your assets at fair market value (deemed disposition). Unrealized capital gains become taxable in your final return, unless assets are transferred to a surviving spouse, in which case taxation can be deferred.
Will the inclusion rate rise to 66.67%?
The 2024 federal budget proposed raising the rate to 66.67% for individual gains above $250,000 per year. This measure was deferred and its status was uncertain at time of writing. Check with the CRA or a tax professional for the rate currently in effect before making major decisions.
Can a capital loss reduce my employment income?
No. Capital losses can only offset capital gains, never ordinary income like employment income or interest. If your losses exceed your gains for the year, you can carry them back 3 years or forward indefinitely to offset future gains.
Sources & references
- Agence du revenu du Canada – Guide des gains en capital (T4037)
- Agence du revenu du Canada
- TaxTips.ca – Capital Gains
- Gouvernement du Canada – Budget fédéral 2024
Educational content; verify figures with official sources before acting.