The Department of Finance has announced plans to introduce legislation in Parliament regarding changes to the capital gains inclusion rate, with a new effective date of January 1, 2026. This announcement confirms that, starting January 1, 2026, the inclusion rate will increase from one-half to two-thirds for capital gains exceeding $250,000 annually for individuals, and for all capital gains realized by corporations and most types of trusts.

In light of this, the Canada Revenue Agency (CRA) will continue to administer the current capital gains inclusion rate of one-half until the new rate takes effect. This means that all capital gains realized before January 1, 2026, will be subject to the current inclusion rate of one-half, unless an exemption applies.

The announcement also reaffirms the government’s intention to maintain the previously proposed increase to the Lifetime Capital Gains Exemption (LCGE) limit to $1.25 million. This change, included in the Notice of Ways and Means Motion (NWMM) tabled in Parliament on September 23, 2024, will apply to dispositions occurring on or after June 25, 2024, with indexation of the LCGE resuming in 2026.

For more information, please visit CRA’s website.