The Canada capital gains inclusion rate is the portion of a gain added to taxable income, a key variable in international crypto wealth planning for Canadian residents. It is currently 50% for individuals. A 2024 federal budget proposal to raise it to two-thirds (about 66.67%) on annual gains above $250,000 was deferred and has not been enacted. Verify the current status with qualified Canadian tax counsel.
CCO/Compliance flag: The slug and original source article treat the 66.67% rate as already in force. It was not. This page corrects that record. Canadian tax law changes at the federal and provincial level; legal status should be verified before publication.
What Is Canada's Capital Gains Inclusion Rate?
The inclusion rate is the fraction of a capital gain that gets added to your taxable income. Canada does not tax capital gains as a standalone category; the included portion is simply added to ordinary income and taxed at your marginal rate.
Current rate: 50%
Example: You sell an investment property and realize a $200,000 gain. At a 50% inclusion rate, $100,000 is added to your taxable income. You pay tax on that $100,000 at your marginal rate, not on the full $200,000.
The inclusion rate has not always been 50%. It was higher in earlier decades (75% through much of the 1990s) before being reduced to the current 50% in 2000, where it has remained since.
What Did the 2024 Federal Budget Propose?
The April 2024 federal budget proposed raising the inclusion rate to two-thirds (approximately 66.67%) on capital gains realized in a single year above $250,000 for individuals, and on all capital gains for most corporations and trusts.
Key details of the proposal as announced:
- The $250,000 annual threshold would apply per individual, resetting each calendar year.
- Gains up to $250,000 per year would remain at 50%.
- Corporate and trust gains above zero would be fully subject to the two-thirds rate (no threshold).
- An effective date of June 25, 2024 was announced.
What actually happened: The federal government subsequently deferred the effective date, signaled it would not proceed, and as of the date of this article the measure has not been enacted into law. The 50% rate remains in force. CCO should confirm the current legislative status before this page is published, as this area remains in flux.
How the Inclusion Rate Is Applied (50% Mechanics)
| Scenario | Gain Realized | Included at 50% | Taxable Income from Gain |
|---|---|---|---|
| Small investment sale | $50,000 | $25,000 | $25,000 |
| Rental property exit | $200,000 | $100,000 | $100,000 |
| Business sale | $500,000 | $250,000 | $250,000 |
| Large real estate portfolio | $1,000,000 | $500,000 | $500,000 |
The included amount is added to all other taxable income for the year and taxed at the applicable federal and provincial marginal rate. Canada's top combined federal-provincial marginal rates vary by province (illustrative: roughly 48%–54% in recent years; verify current provincial figures).
Does the Lifetime Capital Gains Exemption Still Apply?
Yes. The Lifetime Capital Gains Exemption (LCGE) shields qualifying gains from taxation entirely, subject to a lifetime cap. As of the 2024 federal budget, the LCGE was increased to $1,250,000 for gains on:
- Qualified small business corporation (QSBC) shares
- Qualified farm property
- Qualified fishing property
The LCGE amount is indexed annually. Once the full exemption is used, subsequent gains on qualifying property are subject to the standard inclusion rate. The LCGE does not apply to investment real estate, cryptocurrency, or publicly traded securities.
How Does the Inclusion Rate Affect Crypto Capital Gains?
Canada's Canada Revenue Agency (CRA) treats cryptocurrency dispositions as capital gains events (or sometimes business income, depending on frequency and intent). The same inclusion rate applies.
A Canadian resident who sells, trades, or otherwise disposes of crypto at a profit realizes a capital gain subject to the current 50% inclusion rate. If the deferred higher-rate proposal were ever enacted, large one-year crypto exits above the annual threshold could face the higher included portion, but that change is not currently in force.
For Canadians holding significant crypto positions, the interaction of the inclusion rate with timing of dispositions, corporate holding structures, and the LCGE (where applicable) is a material planning consideration that requires qualified Canadian tax counsel.
See crypto tax planning for HNW investors for U.S.-focused context; note that U.S. and Canadian rules differ substantially.
What Is a Section 85 Rollover?
A Section 85 rollover is a mechanism under the Income Tax Act (Canada) that allows a taxpayer to transfer eligible property, including certain securities, to a Canadian corporation at a tax-deferred "elected amount," deferring the capital gain to a future disposition. It does not eliminate the gain; it delays when the gain is recognized.
Section 85 rollovers require proper documentation and CRA filings, and eligibility rules are specific. This is a specialized Canadian tax planning tool; it requires Canadian tax counsel to evaluate and execute.
Related Questions
Is the 67% inclusion rate currently in effect in Canada?
No. As of the date of this article, the two-thirds (approximately 66.67%) inclusion rate proposed in the April 2024 federal budget was deferred and has not been enacted. The current inclusion rate for individuals remains 50%. Confirm current legislative status with qualified Canadian tax counsel before making planning decisions.
Does the $250,000 annual threshold automatically protect gains under that amount from any future higher rate?
Only if a higher-rate rule with that threshold is enacted. Under current law (50% flat), no threshold distinction exists, all gains are included at 50%. If a two-tiered rule is passed in the future, the threshold mechanics would be defined by the enacted legislation, which may differ from the 2024 proposal. Annual planning review with Canadian counsel is appropriate given legislative uncertainty.
How does Canada's inclusion rate compare to U.S. capital gains tax?
The two systems are structurally different. The U.S. taxes long-term capital gains at preferential rates (0%, 15%, or 20% depending on income), applied to the full gain. Canada uses an ordinary income rate applied to only the included portion of the gain. The effective rate on a large gain can be comparable between the two countries depending on province and income level, but the mechanics and planning strategies differ substantially. Cross-border families need counsel in both jurisdictions.
Do Canadian corporations pay the same inclusion rate as individuals?
Under current law, corporations also use a 50% inclusion rate. The deferred 2024 proposal would have applied a two-thirds rate to all corporate capital gains with no $250,000 threshold. That distinction makes the corporate vs. personal holding decision more sensitive to the legislative outcome if a higher-rate rule is eventually enacted.
Internal Links
For context on how U.S. and cross-border crypto tax planning differs, see crypto tax planning for HNW investors and crypto tax reporting for trusts.
For family office coordination across jurisdictions, see digital asset family office and crypto wealth planning checklist.
For estate and trust considerations when significant gains are involved, see crypto estate planning for high-net-worth families.
Sources
- Canada Revenue Agency, Guide for Cryptocurrency Users and Tax Professionals, https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/digital-currency/cryptocurrency-guide.html
- Department of Finance Canada, Budget 2024: Fairness for Every Generation (April 2024), https://budget.canada.ca/2024/report-rapport/chap2-en.html (proposal details; verify enactment status)
- Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.)), s. 38 (inclusion rate), s. 85 (rollover provisions), https://laws-lois.justice.gc.ca/eng/acts/I-3.3/
- Canada Revenue Agency, T4037 Capital Gains 2023, https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037.html
Compliance Note
This page is for educational purposes only. It does not constitute tax, legal, or investment advice. Canadian tax law is complex and jurisdiction-specific; federal and provincial rules interact in ways that vary significantly by province and individual circumstance. DAG Wealth (Digital Ascension Group) is a U.S.-based firm and is not licensed to provide Canadian tax or legal advice. The investment advisory entity, DAG Wealth, is a U.S. SEC-registered investment adviser; its registration does not extend to Canadian securities or tax counsel. Always engage qualified Canadian tax counsel before making decisions based on inclusion rate rules, LCGE eligibility, corporate structure, or Section 85 rollover mechanics. Tax laws change; verify all figures and legislative status with current primary sources before relying on this content. Registration does not imply a certain level of skill or training.