Canada taxes capital gains by including only a portion of the gain in taxable income. The current enacted baseline is the one-half inclusion rate: 50% of a taxable capital gain is included in income, while the other 50% is not taxed.
A capital gain is generally calculated as proceeds of disposition minus the adjusted cost base and eligible outlays or expenses. The taxable capital gain is then the included portion of that net gain. For high-net-worth investors, the inclusion rate affects portfolio rebalancing, business exits, estate freezes, charitable planning, and timing decisions around dispositions.
A proposed increase to the inclusion rate was announced in 2024, but the federal government later cancelled the proposed increase and CRA reverted administration to the currently enacted one-half rate. Honios monitors official Finance Canada, CRA, and Parliamentary developments for any future proposal or enacted change to this baseline.