The 2024 federal budget raised the capital gains inclusion rate. Here's what actually changed, who it affects, and what Canadian investors should do about it.
The federal government made the most significant change to capital gains taxation in decades.
Canada's 2024 federal budget, introduced by then-Finance Minister Chrystia Freeland, increased the capital gains inclusion rate — the fraction of a capital gain that gets added to your taxable income. The change took effect on June 25, 2024.
Before June 25, 2024: the inclusion rate was 1/2 (50%) for everyone — individuals, corporations, and trusts alike. After June 25, 2024, the rules split depending on who you are:
50% inclusion rate for everyone. Half of your capital gain was added to taxable income. This had been the rule since 2000.
Individuals: still 50% on first $250K of gains per year; 66.67% on gains above $250K. Corporations and trusts: 66.67% on ALL capital gains.
What is an "inclusion rate"? Capital gains are not taxed in full in Canada — only a portion (the inclusion rate) is added to your income and taxed at your marginal rate. At a 50% inclusion rate and a 50% marginal tax rate, the effective capital gains tax rate is 25%. At a 66.67% inclusion rate, that effective rate rises to ~33%.
For individual Canadians, the rules now depend on how much capital gain you realize in a single calendar year.
For individuals, the $250,000 annual threshold creates a two-tier system:
For most individual investors — including the majority of Canadians who invest through TFSAs, RRSPs, or modest non-registered accounts — realizing more than $250,000 in capital gains in a single year is uncommon. The change primarily affects high-net-worth individuals, those selling real estate with large embedded gains, and small business owners (though the LCGE provides protection for business sales — more on that below).
For corporations and trusts, there is no threshold. All capital gains, from the first dollar, are now included at 66.67%. This affects incorporated professionals, holding companies, and family trusts — and created significant tax planning urgency in spring 2024.
Under the old rules, the same $300,000 gain at 50% inclusion and 50% marginal rate would have produced a tax bill of $75,000 (25%). The new rules cost this investor approximately $4,167 more in tax — the incremental cost of the higher inclusion rate on the portion above $250,000.
The LCGE was not affected by the 2024 inclusion rate change. Key points:
For small business owners planning an eventual sale, proper structuring remains critical. The LCGE is one of the most valuable tax tools available to Canadian entrepreneurs, and the 2024 budget actually improved it.
Practical steps for Canadians affected by the inclusion rate change.
If you anticipate selling assets with large capital gains — investment property, a business, a concentrated stock position — consider whether you can spread the disposition across multiple calendar years. Keeping each year's gains under $250,000 keeps the entire gain at the 50% inclusion rate. A sale that triggers $500,000 in one year gets partially taxed at 66.67%; the same gain realized over two years ($250K each year) stays entirely at 50%.
Capital losses directly offset capital gains. If you have losses in your non-registered portfolio, harvesting them reduces your net gains — and keeps more of your gains in the 50% inclusion bracket. See our tax-loss harvesting guide for ETF investors for how to do this correctly, including avoiding the superficial loss rule.
At death, all your non-registered capital property is deemed to be disposed of at fair market value — a "deemed disposition." If you've held appreciated assets (investment real estate, non-registered portfolio, private company shares) for decades, large embedded gains can trigger a significant tax bill on your final return. The new inclusion rate means gains above $250,000 are now more expensive. An estate plan review is warranted, especially if your net worth is substantial. Consult a tax advisor or estate lawyer.
If you hold investments inside a corporation or holding company, the 66.67% inclusion rate now applies to all capital gains — there's no $250,000 threshold. Corporate tax planning for capital gains dispositions should be reviewed with an accountant.
Capital gains inside a TFSA are completely tax-free. Capital gains inside an RRSP are sheltered until withdrawal (and then taxed as income, not as capital gains). If you're not already maximizing your TFSA and RRSP, doing so is the most effective way to shelter investment growth from capital gains tax entirely — the inclusion rate change doesn't affect these accounts at all.
For most Canadian investors: If your portfolio is primarily in a TFSA and RRSP and you're not realizing $250,000+ in non-registered gains per year, the 2024 inclusion rate change has minimal direct impact on you. Focus on registered accounts first and the change matters far less.
As of early 2026, the capital gains inclusion rate increase has faced significant political opposition and legal challenges. The Conservative Party has indicated they would reverse the change if elected. The Liberal government that introduced the measure has since changed leadership.
Check Canada.ca for current status. Tax legislation in Canada can change with each budget. Before making any major disposition decisions based on the inclusion rate, verify the current rules at canada.ca/taxes or consult a tax professional. This page reflects the rules as enacted in 2024 and may not reflect subsequent legislative changes.
The political uncertainty makes timing decisions complicated. Selling now to "lock in" the 50% inclusion rate for large gains might or might not be advantageous depending on how the political situation resolves. A tax advisor can help model the scenarios for your specific situation.
For context on related tax strategies, see our guides on:
Learn how to reduce capital gains tax with ETF tax-loss harvesting — now more valuable than ever.
Tax-Loss Harvesting Guide → Superficial Loss Rule →This article is for educational purposes only and does not constitute tax or financial advice. Tax legislation can change. Verify current rules at canada.ca and consult a qualified tax professional before making disposition or planning decisions based on capital gains tax rules.