Canada delays capital gains tax increase to 2026

Executive summary

Canadian taxpayers who already filed returns based on the proposed increase to the capital gains inclusion rate (CGIR) should be able to amend their returns after the federal government delayed the increase until 2026. The ongoing political uncertainty in the country means Canadians considering dispositions of capital property in 2026 and beyond should account for the possibility of no increase.

The federal government delayed its proposed increase to the capital gains inclusion rate (CGIR) to on or after Jan. 1, 2026 after initially applying to dispositions occurring on or after June 25, 2024.

The Canada Revenue Agency (CRA) has announced that:

• It will grant relief from late-filing penalties and interest to impacted individuals and trusts who file by June 2, 2025 and May 1, 2025, respectively.
• Corporations who filed using the increased CGIR will have reassessments issued to adjust the inclusion rate.

Taxpayers can also request amendments to their assessment. All taxpayers should track capital gains and losses according to the new Jan. 1, 2026 effective date to ease compliance.

The CGIR determines the portion of income from the sale of capital property—including shares, land, buildings and equipment—that is included in a taxpayer’s income.

Initially proposed in last year’s federal budget, the CGIR was set to rise from 50 per cent to 66.67 per cent. Individuals and some types of trusts would continue to be eligible for the one-half inclusion rate on their first $250,000 of net capital gains in a year.

Related amendments

The increased CGIR was accompanied by several related or consequential amendments, such as an increase in the withholding tax rate for dispositions of taxable Canadian property by non-residents.

While the Department of Finance has not yet clarified how most proposed amendments will be impacted, it did state the increase of the Lifetime Capital Gains Exemption from $1,016,836 to $1.25 million will still be effective June 25, 2024 and the Canadian Entrepreneurs’ Incentive will still be introduced as of the 2025 taxation year. Neither of these amendments are currently law.

Political uncertainty complicates increase’s future

Canada’s ongoing political uncertainty in the wake of Trudeau’s resignation left proposed legislation like the increased CGIR unresolved.

A new Liberal leader, who would become prime minister, is expected to be announced on March 9. The future of the increase is not certain under a new Liberal prime minister—and, should an early election be triggered and a new party takes over, a new administration may have its own vision for the CGIR.

In the interim, those considering dispositions of capital property which will occur in 2026 onward should account for the possibility of no increased CGIR.