Deferral in Implementation of Change to Capital Gains Inclusion Rate

On January 31st, Finance Minister Dominic LeBlanc announced that the federal government is postponing the increase of the capital gains inclusion rate from 50% to 66.67% for capital gains above $250,000, now set for January 1, 2026. To protect middle-class Canadians from higher taxes, the government will maintain or enhance capital gains exemptions and introduce new incentives. Key measures include 

  • maintaining the Principal Residence Exemption,

  • introducing a $250,000 annual threshold for modest gains including sales of secondary property (effective January 1, 2026),

  • increasing the Lifetime Capital Gains Exemption to $1.25 million effective June 25, 2024 on the sale of small business shares and farming/fishing property, and

  • launching a Canadian Entrepreneurs’ Incentive that reduces the inclusion rate for eligible gains. This incentive would take effect starting in the 2025 tax year and the maximum would increase by $400,000 each year, reaching $2 million in 2029. Combined with the new $1.25 million lifetime capital gains exemption, when this incentive is fully rolled out, entrepreneurs would pay less tax and be better off on capital gains of up to $6.25 million

These changes aim to support individuals and entrepreneurs while ensuring they are not adversely affected by the new capital gains inclusion rate.