When you sell an investment or property for more than you paid, the profit is a capital gain. Canada taxes capital gains more gently than regular income, but the details matter.
The inclusion rate is still 50%
Only half of a capital gain is added to your taxable income. A $20,000 gain adds $10,000 to your income, taxed at your normal rate. A proposal to raise the inclusion rate to two-thirds was cancelled in March 2025, so the 50% rate continues in 2026.
How the gain is calculated
Capital gain = selling price, minus your adjusted cost base (what you paid plus purchase costs and improvements), minus selling costs such as commissions or legal fees. Keep your purchase records. Without them, proving your cost can be difficult.
Capital losses
If you sell at a loss, the capital loss can offset capital gains. Unused losses can be carried back up to three years or forward indefinitely, but only against capital gains.
Your home: the principal residence exemption
The gain on your principal residence is usually tax-free, but you must still report the sale on your tax return and designate the home. Missing the designation can cost you.
The property-flipping rule
If you sell a home you’ve owned for less than 365 days, the profit is generally treated as fully taxable business income, not a capital gain, unless an exception applies (such as a death, separation, new job or birth in the family).
Gains that aren’t taxed at all
- Investments inside a TFSA: gains are tax-free.
- Investments inside an RRSP or FHSA: no tax on gains inside the account, though RRSP withdrawals are taxed as income.
Planning ideas
- Realize losses before year-end to offset gains (watch the superficial loss rules).
- Spread large gains over more than one tax year where possible.
- Hold growth investments in your TFSA first.
Selling property or investments this year? See our plans and pricing or contact Wealth Street Services. We’re in Brampton and serve clients across Canada.
Sources
- Questrade: Capital gains tax changes in Canada
- Wolters Kluwer: Capital gains inclusion rate change canceled
This article is general information, not tax or financial advice. Rules and amounts change, so confirm details with the Canada Revenue Agency or speak with our team about your situation.
