Fact checked

This content has been reviewed by Canadian estate planning experts or legal professionals. Our editorial team is committed to ensuring the accuracy and currency of content related to estate planning, online wills, probate, powers of attorney, guardianship, and other related topics. Our goal is to provide reliable, up-to-date information to assist you in understanding these complex topics.

Capital Gains Tax in Canada

In this article:

    This article was reviewed by Scott Syrja, Executive Financial Consultant at Syrja & Associates

    The 2024 amendments to Canada’s Income Tax Act have been announced and will come into effect after June 25th, 2024. Though it’s important to note that these laws are not in effect yet.

    This article explains capital gains tax in Canada, what the June 2024 changes mean for Canadians, and how changes to the capital gains tax may affect inheritance in Canada.

    ⬇️ Jump to capital gains tax calculator

    Key takeaways

    • After June 25, 2024, the Canadian Budget 2024 will increase the capital gains tax rates.
      • For corporations and trusts, 66.67% of all capital gains will be taxable income
      • For individuals, previously, all capital gains were taxed at the 50% rate. After this budget comes into force, the first $250,000 of capital gains in a year will have 50% included as taxable income. Any capital gains exceeding $250,000 will have 66.67% included as taxable income.
    • Capital gains tax applies to assets like stocks, bonds, mutual funds, real estate (excluding primary residences), precious metals, business assets, and cryptocurrencies
    • Canadians can avoid capital gains tax by using Tax-Free Savings Accounts (TFSA), deferring asset sales to lower-income years, claiming capital losses to offset gains, and donating appreciated assets to charity.
    • If you inherit real estate, you do not need to pay capital gains tax if it was a primary residence.

    What is capital gains tax in Canada?

    Capital gains tax is the tax you pay when the value of certain assets like stocks, real estate, business assets, and valuable metals, increases beyond what you paid to purchase the asset.  

    It’s not a separate tax on its own. Instead, the profit you make gets added to your total income and taxed along with your regular income tax.

    Currently, when you have capital gains, only half of that profit is counted as part of your income for tax purposes. This is called the capital gains inclusion rate, and it also applies to losses.

    💵 Example of capital gains tax You pay $400 to purchase 100 shares in Company ABC for $4/share. The value of the shares goes up to $6/share, and you sell the shares and make a profit of $200. Only $100 (50% of your $200 gain) would be added to your total income for tax purposes.

    What’s changed about capital gains tax in 2024?

    The Canadian Budget 2024, effective June 25, 2024, is increasing the tax rate on any gains from half to two-thirds for corporations and trusts. For individuals, the rate is increasing on profits exceeding $250,000 made after June 25, 2024.

    This means that for individuals, the first $250,000 of capital gains in a year will have 50% included as taxable income, while any gains above $250,000 will have 66.67% included as taxable income. For corporations and trusts, 66.67% of all capital gains will be taxable income.

    The $250,000 threshold applies to individuals after considering various factors like current-year losses, losses from previous years used to reduce current gains, and exemptions claimed for certain gains.

    🏡 Example impact of this change You bought a cottage in 2020 for $750,000. You sell it in July 2024 for $1.1M, a capital gain of $350,000. Previously, that $350,000 gain would have been subject to the 50% capital gains tax rate, meaning $175,000 would be added to your taxable income for the year.

    Now, the first $250,000 will be subject to the 50% tax rate, and the remaining $100,000 will be subject to the 66.67% tax rate. This means $192,667 will be added to your taxable income, an increase of $17,667.

    Losses from previous years can still offset gains, meaning a loss from before the rate change can still cancel out a gain afterward.

    Note: The $250,000 threshold for individuals applies fully in 2024 only to gains made after the change.

    📺 Watch video of Prime Minister Justin Trudeau explaining the capital gains tax changes →

    Types of assets subject to capital gains tax

    The following types of assets are subject to capital gains tax in Canada after the Budget 2024 changes:

    • Stocks, bonds, mutual funds, and other investment securities 
    • Real estate properties, including rental properties, cottages, and land (excluding principal residences) 
    • Precious metals like gold and silver 
    • Business assets such as equipment, inventory, and intellectual property 

    Capital gains on inheritance

    Assets such as stocks, real estate, valuable metals, and business assets are subject to capital gains taxes. If you inherit any of these assets, there is no tax at the time of inheritance because Canada has no inheritance tax. 

    That being said, when someone passes away, any assets they owned will be considered to be “sold” on their date of death, and the estate would be required to pay capital gains on those assets. 

    For example, if you own a secondary residence like a cottage, and you purchased it for $750,000 in 2020, and you pass away in July 2024 when the cottage is worth $1.1M, your estate will be required to pay capital gains tax on the $350,000 gain.

    Is there capital gains tax on inherited property in Canada?

    Because of the principal residence exemption, if you inherit real estate and it is a primary place of residence, you will not owe capital gains tax if you sell it later on. But if you inherit property and sell it for a profit without it being your primary residence, then the rules of capital gains tax apply.

    🧮 New capital gains tax for selling a secondary residence Here’s an example of the capital gains tax calculation for selling a secondary residence you inherited from your parents. The residence is valued at $850,000 in Canada after June 25, 2024, under the new rules. It was bought years ago for $600,000, but on the date you received it, the fair market value (FMV) was $700,000.

    Capital Gain = Selling Price - FMV
    = $850,000 - $700,000
    = $150,000

    Now we determine the taxable portion of the capital gain:
    For the first $250,000 of capital gains: 50% included as taxable income
    For any gains above $250,000: 66.67% included as taxable income

    Taxable Portion of Capital Gain = $150,000 × 50%
    = $75,000

    As an example, let's say your marginal tax rate on capital gains is 25%.

    Capital Gains Tax = Taxable Portion of Capital Gain × Capital Gains Tax Rate
    = $75,000 × 25%
    = $18,750

    So, under these new rules, if you were to sell the residence you inherited from your parents, valued at $850,000 with a fair market value of $700,000 after June 25, 2024, you would owe approximately $18,750 in capital gains tax.

    How to avoid capital gains tax on property in Canada

    If it’s a primary residence, there is an exemption from capital gains tax. But if the inherited property is not a primary residence, it will be subject to capital gains tax when the owner passes away.

    Those taxes are taken care of by the estate itself, not the beneficiary who receives the property as an inheritance. 

    Additionally, capital gains still apply if you are a co-owner of the residence and the other owners pass away. The difference is that you would only pay capital gains tax on the portion you inherited from your parents, not on your existing ownership stake. 

    How to avoid/reduce capital gains tax

    Joint ownership of assets

    For example, by changing ownership of your solely-owned secondary home to jointly owned with rights of survivorship with your spouse or loved one, they become the sole owner when you pass away. This means the asset isn’t “sold” to your estate after you pass, so your estate does not have to pay capital gains taxes. 

    The asset is then only subject to capital gains if the surviving owner sells it or if it goes into their estate when they pass away.

    Use tax-advantaged accounts like TFSAs and RRSPs

    Investments held in a Tax-Free Savings Account (TFSA) are completely sheltered from capital gains tax, so any capital gains realized within your TFSA are tax-free.

    Capital gains in a Registered Retirement Savings Plan (RRSP) are tax-deferred until withdrawal, at which point they are taxed as regular income. So until you take the money out of your RRSP, it remains tax-free.

    Claim capital losses to offset gains

    Another technique you can use to reduce or avoid capital gains tax is by reducing your gains through active losses. This is called tax-loss harvesting and involves first selling losing investments, then buying a similar (but not the same) investment. This allows you to experience a reportable loss that offsets other capital gains. 

    Losses can also be deferred back a maximum of three years prior to the current year or, if you have net capital losses that cannot be fully offset by capital gains in the current year, you can carry the unused portion forward indefinitely to future years. 

    Defer selling appreciated assets until a lower income year

    In Canada, you don’t have to pay capital gains tax on an investment that has increased in value (an unrealized capital gain) until you actually sell or dispose of that asset. If you’re having a good income year and are concerned about paying high capital gains tax, you may want to consider waiting a year before selling assets that are subject to capital gains tax.

    Donate appreciated assets to charity

    When you donate to a registered charity, you receive a tax receipt that lets you deduct part of your donation from your income tax. To reduce or avoid capital gains tax, you can also donate stocks directly to charity. In this situation, you’re transferring stocks, not selling them. Because of this, there is no capital gain and no tax added to your income. 

    💙 Learn more about leaving gifts to charity →

    Capital gains tax exemptions

    1. The principal residence exemption allows you to sell your home tax-free as long as it is a primary residence.
    2. Individuals may be eligible for a lifetime capital gains exemption (LCGE) on the sale of qualified small business corporation shares or farm/fishing property. In 2024, the LCGE amount is $1,016,836, indexed to inflation. The Budget 2024 wants to increase the LCGE to apply to up to $1.25 million of eligible capital gains. Note: you must own the shares in the business for at least 2 years to be eligible for this exemption.
    3. Any capital gains realized within a TFSA or RRSP are not subject to capital gains tax while the funds remain in the account.

    When is capital gains tax paid?

    Capital gains tax is payable in the year that your asset is sold or disposed of, not when the gain is realized.

    The tax is reported and paid when filing your annual income tax return for that year.

    Capital Gains Tax Calculator

    The marginal tax rate is the percentage of tax you pay on each additional dollar you earn, which means it's the rate that applies to your highest level of income. Learn more.

    Plan for the future with an estate plan

    It’s important to keep an ear open for new legislative changes that may affect your future plans. No one knows when legislation surrounding the inheritance or even probate processes will change, so remember to always keep your estate plans, insurance policies, and investment profiles up to date with named beneficiaries to protect the inheritances of your loved ones.

    If you make a legal will with Willful, you’ll have free unlimited updates for life and peace of mind knowing your wishes are documented and your estate is secure. 

    Protect their inheritance by making an estate plan →

    Willful vs. using a lawyer

    See how much you can save by choosing Willful

    What province do you live in?

    Willful vs. using a lawyer

    Do you want to create a will or a will and power of attorney documents?
    Do you want to create a will or a notarial will?
    Will only

    Will and Powers of Attorney

    Notarial will


    Willful vs. using a lawyer

    Besides yourself, how many additional family members need to create their will?

    Willful vs. using a lawyer

    Capital Gains Tax in Canada
    A Guide to Managing Online Accounts After the Death of a Loved One
    Common Law Saskatchewan: What It Means And What You’re Entitled To

    Get peace of mind for you and your family by
    creating your will today.