Capital Gains Inclusion Rate in Canada: History & 2025 Rate
The inclusion rate is one number that has an outsized effect on every capital gains calculation in Canada. It determines what percentage of your gain is actually taxable. For 2025, that number is 50% — meaning half of any capital gain is added to your income for the year.
What is the inclusion rate?
When you sell a capital property for a profit, the CRA does not tax the full gain. Only a fraction — the "included" portion — is added to your taxable income.
Taxable capital gain = Capital gain × inclusion rate
With a 50% inclusion rate, a $100,000 capital gain produces a $50,000 taxable capital gain. At a 43% combined marginal rate, that's $21,500 in tax — an effective rate of 21.5% on the actual gain.
History of Canada's inclusion rate
The inclusion rate has changed several times since capital gains became taxable in Canada in 1972:
| Period | Inclusion rate |
|---|---|
| 1972–1987 | 50% |
| 1988–1989 | 66.67% |
| 1990–2000 | 75% |
| 2000–2024 | 50% |
| 2025 | 50% |
The rate peaked at 75% in 1990 (meaning three-quarters of a gain was taxable). It was cut to 50% in the February 2000 federal budget, and has remained there since.
The 2024 proposed change that didn't happen
In the April 2024 federal budget, the Liberal government proposed raising the inclusion rate from 50% to 66.67% for capital gains realized on or after June 25, 2024 — for individuals on gains above $250,000 per year, and for corporations and trusts on all gains.
Parliament was prorogued in January 2025 before the legislation passed. The new Conservative government, elected in April 2025, has not reintroduced the measure. The CRA confirmed the 50% rate for the 2025 tax year in the T4037 guide.
Bottom line: For your 2025 taxes, the inclusion rate is 50% across the board — for individuals, corporations, and trusts.
Why the inclusion rate matters for planning
The inclusion rate directly determines the effective tax rate on your capital gains:
Effective rate = Combined marginal rate × inclusion rate
At the 2025 rate of 50%:
- A taxpayer in a 33% combined bracket pays an effective 16.5% on gains
- A taxpayer in a 53% combined bracket pays an effective 26.5% on gains
This is why investors often prefer investments that generate capital gains rather than fully taxed interest income. A $1,000 capital gain at 53% marginal is taxed at $265. The same $1,000 in interest income is taxed at $530.
Does the inclusion rate apply to all capital gains?
Yes — for 2025, the 50% inclusion rate applies uniformly to all capital gains regardless of the asset type, holding period, or dollar amount. There is no distinction between short-term and long-term gains the way the US tax system works.
Some capital gains may be reduced by exemptions (the principal residence exemption or the Lifetime Capital Gains Exemption) before the inclusion rate is applied to the remaining taxable portion.
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