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Tax PlanningMay 8, 2024

The 2024 Capital Gains Increase Was Cancelled

The 2024 federal budget proposed a higher capital gains inclusion rate, but the proposal was cancelled in 2025 and never took effect. Here is what was proposed, what happened, and what still matters for planning.

By Shea Sanche, CFP® · Last reviewed: October 2026

The 2024 federal budget proposed a higher capital gains inclusion rate, but the proposal was cancelled in 2025 and never took effect. Here is what was proposed, what happened, and what still matters for planning.

What Was Proposed and What Happened

Capital gains in Canada have a 50% inclusion rate, meaning only half of a capital gain is included in taxable income. The April 2024 federal budget proposed raising that rate to two-thirds for individual gains above $250,000 in a year, and for all gains realized by corporations and most trusts, starting June 25, 2024. On January 31, 2025, the start date was deferred to January 1, 2026. On March 21, 2025, the proposal was cancelled. It never took effect, and the inclusion rate remains 50% for individuals, corporations and trusts.

Who This Still Affects

  • Business owners selling their companies: The same budget raised the Lifetime Capital Gains Exemption to $1,250,000 for dispositions on or after June 25, 2024. That increase was kept, and the exemption is $1,275,000 for 2026. Business sale planning still centres on qualifying for it.
  • Incorporated professionals with investment portfolios: Capital gains inside a corporation are included at 50%, the same as for individuals. The proposed higher rate for corporations did not go ahead.
  • Real estate investors: Rental properties and vacation properties with large accrued gains are taxed on 50% of the gain on disposition.
  • Estates: The deemed disposition at death still triggers capital gains on appreciated assets, with 50% of the gain included in income.

Key Planning Considerations

Timing of gains: For assets with large embedded gains, it can make sense to spread recognition across several years rather than realize one large gain in a single year, which can push income into the top bracket.

Tax-loss harvesting: Realized capital losses can offset realized gains in the same year, be carried back three years, or be carried forward indefinitely.

TFSA maximization: Capital gains inside a TFSA are completely sheltered from tax, which makes it a good home for investments with high growth potential.

Charitable giving of appreciated securities: Donating appreciated securities directly to a charity eliminates the capital gain on those securities. These decisions work best when tax and financial planning are coordinated. Our Tax Strategy hub covers the key planning decisions for Canadians navigating this landscape.

Common Questions

Answers to the questions people actually ask.

Should I contribute to my RRSP or TFSA in Canada?
It depends on your current vs future tax rate and timeline. RRSPs are powerful when today’s marginal rate is higher than your expected withdrawal rate; TFSAs maximize flexibility and tax-free withdrawals.
How do capital gains taxes work in Canada?
Capital gains are taxed when you sell an asset for more than you paid, and 50% of the gain is included in your taxable income. Planning focuses on timing, concentration risk, and coordinating gains with your broader income plan.
What is income splitting in Canada?
Income splitting in Canada refers to tax strategies that allow certain income to be shared between spouses or common-law partners under Canadian tax rules to reduce the household’s overall tax burden. ← Back to all articles

Related Reading

Key Takeaway

The proposed increase to the capital gains inclusion rate was cancelled and never took effect. The rate remains 50%, and the higher Lifetime Capital Gains Exemption was kept. Planning for business sales, cottages, rental properties and estates should be based on the rules in force, not the cancelled proposal.

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