- You keep
- $8,500
- Tax
- $1,500
How it works
When you sell an investment or property for more than you paid, 50% of the gain (the inclusion rate) is added to your income for the year, and taxed at your usual federal and provincial rates. The government’s plan to raise this to two-thirds was cancelled in 2025.
Example: a $10,000 gain adds $5,000 to your income. At a combined tax rate of 30%, that’s $1,500 of tax. On a salary of $80,000 in Ontario, where the rate on the next dollar is 29.65%, it’s about $1,483.
You pay tax only when you sell (or are treated as selling), not while the investment goes up. You report gains on Schedule 3 of your tax return, using the T5008 or trading statements from your brokerage. The tax refund calculator shows how a gain changes your refund or what you owe.
Working out the gain
Your gain is the price you sold for, less your adjusted cost base (ACB) and the costs of selling.
- Your ACB is what you paid, plus commissions and other buying costs.
- If you bought the same shares or fund at different times, your ACB is the average cost per unit, not the price of the batch you sold.
- For shares bought in US dollars, convert both the purchase and the sale to Canadian dollars at the exchange rate on each date. A change in the exchange rate can create a gain or loss on its own.
Losses
Capital losses can only be set against capital gains, not your salary or other income. Losses you can’t use this year can be carried back 3 years or forward indefinitely.
The superficial loss rule stops you claiming a loss if you, your spouse or a company you control buy the same investment within 30 days before or after the sale and still hold it 30 days after. The loss isn’t lost for good: it’s added to the cost of the shares you bought back.
Your home
The principal residence exemption usually makes the whole gain on your home tax-free, for each year it was your main home. You must still report the sale and designate the home on your tax return. A family can only designate one home a year, so a cottage or a second property can be taxed on part of its gain.
If you sell a home you’ve owned for less than 12 months, the profit is usually taxed in full as business income, not as a capital gain, unless you sold because of a life event such as a death, a divorce, a new job or a new baby.
When you die or give something away
Giving an investment to someone, or leaving it in your estate, counts as selling it at its market value, so the gain is taxed then. Leaving it to your spouse or common-law partner usually defers the tax until they sell.
The lifetime capital gains exemption
Gains on qualified small business shares and qualified farm or fishing property can be tax-free up to a lifetime limit of $1,275,000 in 2026.
Ways to pay less
- Invest in a TFSA, RRSP or FHSA before a non-registered account. See where to invest.
- Time your sales: gains are taxed in the year you sell, so selling in a lower-income year, or spreading sales over two tax years, can cost less.
- Use losses: selling an investment at a loss can offset gains, as long as you avoid the superficial loss rule.
- Keep records of every purchase, sale and reinvested distribution, so your ACB is right.