Is the capital gains inclusion rate still 50% for 2026, or did the two thirds increase go ahead?
The capital gains inclusion rate for 2026 is 50% for individuals, corporations and trusts, so half of a capital gain is taxable and half of a capital loss is allowable. The proposed increase to two thirds, deferred to January 1, 2026, was cancelled on March 21, 2025, and Budget 2025 confirmed it.
The 2026 rate for each kind of taxpayer
As of October 2026, the inclusion rate is one half for everyone. Section 38 of the Income Tax Act still makes a taxable capital gain ½ of the capital gain, an allowable capital loss ½ of the capital loss, and an allowable business investment loss ½ of the business investment loss laws-lois.justice.gc.ca.
| Taxpayer | 2026 inclusion rate | What the cancelled proposal would have applied |
|---|---|---|
| Individual, first $250,000 of net gains | 50% | 50% |
| Individual, net gains above $250,000 | 50% | 66.67% (two thirds) |
| Corporation | 50% on all gains | 66.67% on all gains |
| Most trusts | 50% on all gains | 66.67% on all gains |
| Graduated rate estate or qualified disability trust | 50% | 50% on the first $250,000, two thirds above |
| Net capital loss from another year | Applied at 50% | Adjusted to the rate of the year it is used |
There's no $250,000 threshold in 2026 because there's nothing left for it to protect. The threshold only existed to keep part of an individual's gains at one half once the higher rate arrived canada.ca.
How the two thirds proposal rose and fell
The increase never became law. It went from a budget proposal to a ways and means motion, was pushed back a year and a half, and was then dropped before its new start date.
| Date | What happened |
|---|---|
| Budget 2024 | Proposed raising the rate from one half to two thirds for corporations and trusts, and for individuals on gains above $250,000 a year, for gains realized on or after June 25, 2024 |
| June 10, 2024 | Finance Canada backgrounder confirms the June 25, 2024 start date |
| September 23, 2024 | Notice of Ways and Means Motion tabled; CRA guidance tells filers to apply two thirds |
| January 31, 2025 | Finance Canada defers the start to January 1, 2026; the CRA reverts to one half |
| March 21, 2025 | The Prime Minister cancels the increase and keeps the $1.25 million lifetime capital gains exemption |
| Budget 2025 (November 2025) | The government confirms it will not proceed with the inclusion rate changes or the Canadian Entrepreneurs' Incentive |
The proposal comes from Budget 2024's tax measures budget.canada.ca, and the deferral to January 1, 2026 from Finance Canada's January 31, 2025 release
canada.ca. The cancellation was announced on March 21, 2025
pm.gc.ca, and Finance's 2026 tax expenditures report says Budget 2025 confirmed the government would not proceed
canada.ca. The CRA's corporate page now says the same thing
canada.ca.
The Canadian Entrepreneurs' Incentive went down with it. Budget 2024 proposed an inclusion rate of one half the prevailing rate (so one third once two thirds applied) on up to $2 million of a founder's lifetime gains on qualifying small business corporation shares, with the limit phased in at $200,000 a year from January 1, 2025 budget.canada.ca. Finance's 2026 tax expenditures report lists the incentive among the Budget 2024 capital gains changes and says the government "confirmed in Budget 2025 that it would not proceed with these changes"
canada.ca. Firm articles that still pitch the one third rate on $2 million describe a measure that never arrived.
Firm articles from 2024 and early 2025 still describe a two thirds rate starting in 2026. Ignore them for 2026 planning.
What happened to 2024 returns
On January 31, 2025, the CRA said it had reverted to administering the enacted one half rate, so capital gains realized before January 1, 2026 stay at one half unless an exemption applies canada.ca. Individuals and trusts filed their 2024 returns at one half on reverted T1 and T3 forms.
Because the forms changed late in filing season, the CRA waived late filing penalties and arrears interest for affected filers reporting capital dispositions: until June 2, 2025 for T1 filers and until May 1, 2025 for T3 filers. The relief didn't cover the special elections and returns on forms T2057, T2058 and T2059.
Corporations are the edge case. A small number had already filed T2 returns at two thirds, following the CRA's guidance after the September 2024 motion. The CRA said it would coordinate corrective reassessments to reverse the two thirds rate for them. If your client's 2024 T2 used two thirds and no reassessment has arrived, check its account before you file a 2025 or 2026 return that carries losses forward from that year.
Worked example: an individual with a gain and a loss in 2026
Your client sells two holdings in 2026. Shares A sell for $700,000 with an adjusted cost base of $200,000 and $10,000 of selling costs. Shares B sell for $60,000 with an adjusted cost base of $100,000.
| Step | Amount |
|---|---|
| Shares A: $700,000 less $200,000 less $10,000 | $490,000 capital gain |
| Shares B: $60,000 less $100,000 | $40,000 capital loss |
| Net capital gain | $450,000 |
| Taxable capital gain at 50% (line 12700) | $225,000 |
| Under the cancelled proposal: $250,000 × 1/2 plus $200,000 × 2/3 | $258,333.33 |
| Income the cancellation keeps off the return | $33,333.33 |
Work it as two halves and you land in the same place: a $245,000 taxable capital gain on Shares A, less a $20,000 allowable capital loss on Shares B, is $225,000.
A corporation realizing the same $490,000 gain includes $245,000 in income. Under the proposal it would have included $326,666.67, because corporations had no $250,000 band at one half.
Losses: allowable capital losses and carryovers stay at 50%
An allowable capital loss is half the capital loss, the same fraction as the gain, so 2026 losses offset 2026 gains dollar for dollar after inclusion laws-lois.justice.gc.ca. An unused amount becomes a net capital loss you can carry back three years or forward indefinitely, but only against taxable capital gains
canada.ca.
The rate has been one half every year since 2001, so a net capital loss from 2001 onward applies on line 25300 with no adjustment. Losses from 1988 and 1989 (two thirds) or 1990 to 1999 (three quarters) need the conversion charts on Form T1436. To carry a loss back, use Part 5 of Form T1A instead of amending the earlier return.
An allowable business investment loss is also one half of the business investment loss. It is claimed on line 21700, with the gross loss on line 21699.
Where it goes: Schedule 3 and the other returns
Individuals calculate gains and losses on Schedule 3 (5000-S3), Capital Gains or Losses, and carry the taxable capital gain to line 12700 of the T1 canada.ca. As of October 2026 the CRA's latest Schedule 3 is the 2025 version; the 2026 version isn't published yet.
Corporations report dispositions on T2 Schedule 6, Summary of Dispositions of Capital Property canada.ca. For lifetime exemption claims on qualified small business corporation shares or farm and fishing property, see the lifetime capital gains exemption for 2026.
The 50% rate is the regular tax figure only. Alternative minimum tax recalculates capital gains on Form T691 canada.ca, so a client with a large gain can still owe minimum tax; see alternative minimum tax in Canada.
Sources
Budget 2024 tax measures: supplementary informationbudget.canada.ca
Is there any chance the two thirds rate applies to 2026 gains?
No, not under the law as of October 2026. The increase was never enacted, the government cancelled it on March 21, 2025, and section 38 of the Income Tax Act still sets the rate at one half laws-lois.justice.gc.ca. A future budget could propose a new change, but it would need new legislation.
Did the $1.25 million lifetime capital gains exemption get cancelled too?
Do I adjust a 2023 net capital loss before using it against a 2026 gain?
No. Both years use one half, so the loss applies on line 25300 at face value. Only losses from years with a different rate, such as 1988 to 1999, need the Form T1436 adjustment canada.ca.
Does a trust get the 50% rate on all of its gains?
Yes. In 2026 every trust uses one half on all of its capital gains. The cancelled proposal would have put most trusts at two thirds from the first dollar, with only graduated rate estates and qualified disability trusts getting the $250,000 band canada.ca.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.