Capital Gains Inclusion Rate

When you sell an investment for more than you paid, the profit is a capital gain. In Canada, you don’t pay tax on the full gain. The inclusion rate determines how much of it counts as taxable income.

As of 2026, the inclusion rate is 50% for all capital gains. So if you make a $10,000 capital gain, $5,000 gets added to your taxable income and taxed at your marginal rate. A higher inclusion rate of 66.7% on gains above $250,000 was proposed in 2024 but was ultimately cancelled.

Why it matters

The inclusion rate is one of the reasons capital gains are the most tax-efficient type of investment income in a non-registered account. Interest income is 100% taxable. Dividends have their own system. But capital gains only add 50% to your taxable income, which effectively cuts the tax you owe in half compared to interest.

This matters most in non-registered accounts. Inside your TFSA or RRSP, capital gains aren’t taxed at all (or are deferred in the case of an RRSP), so the inclusion rate is irrelevant. We cover this in more detail in our guide to non-registered accounts.

It’s also worth knowing that you only trigger a capital gain when you sell. If your investments have gone up but you haven’t sold, there’s no tax owed yet. This is called an unrealized gain. You have control over when you sell, which gives you some flexibility to manage when you take the tax hit.

The inclusion rate has changed several times over the years in Canada, so keep in mind it could shift again in future budgets.

Example

You sell an investment in your non-registered account for a $20,000 capital gain. At the 50% inclusion rate, $10,000 gets added to your taxable income. If your marginal tax rate is 33%, you’d pay $3,300 in tax on that gain. Compare that to $20,000 in interest income (say from a savings account), which would be 100% taxable, costing you $6,600 at the same rate. The inclusion rate cuts your tax bill in half compared to interest.