Capital gains in Canada: the legislated inclusion rate
The Income Tax Act includes half of a capital gain in taxable capital gains under the general rule. The inclusion rate is distinct from the income tax rate.
- General legislated inclusion
- One-half of the capital gain under section 38(a), subject to its listed exceptions.Income Tax Act, section 38
- CRA tax-year statement
- CRA’s Capital Gains guide states that the inclusion rate for 2025, the latest published tax year, is 50%.CRA, Capital Gains 2025
Inclusion is not the tax rate
Parliament’s Income Tax Act, section 38(a), defines a taxpayer’s taxable capital gain as half of the capital gain, subject to the exceptions listed in that section. This inclusion rule determines the amount treated as a taxable capital gain; it does not impose an income tax rate of half the gain. Income Tax Act, section 38 (opens in a new tab).
The CRA administers income tax and its Capital Gains guide explicitly states that the inclusion rate for 2025, the latest published tax year, is 50%. The CRA statement refers to that tax year; the current general inclusion rule is set by section 38 of the Income Tax Act. CRA, Capital Gains 2025 (opens in a new tab).
The gain is different from sale proceeds
CRA describes the capital gain or loss calculation as proceeds of disposition minus the adjusted cost base and the outlays and expenses incurred to sell the property. The sale proceeds alone are not the gain. Donations, losses and other special rules can affect the taxable amount; this guide does not calculate final tax payable. CRA, calculating capital gains (opens in a new tab).