Capital Gains Tax Calculator

How Capital Gains Tax Works in Canada (2026)

When you sell a capital property — such as stocks, mutual funds, ETFs, rental property, or a cottage — for more than you paid, the profit is a capital gain. Canada does not tax the full gain. Instead, only 50% of the capital gain (the “inclusion rate”) is added to your taxable income for the year. A proposed increase to 66.67% for gains above $250,000, announced in the 2024 federal budget, was formally cancelled on March 21, 2025. The inclusion rate remains 50% for all capital gains in 2026, regardless of amount.

Your principal residence is generally exempt from capital gains tax under the Principal Residence Exemption (PRE). To claim the exemption, you must designate the property on Schedule 3 and report the disposition on your return — even if no tax is owed. If you owned the property for every year since acquisition, the full gain is sheltered. Rental properties, vacation homes, and inherited properties do not automatically qualify for the PRE and may trigger a taxable gain on sale.

Marginal Tax Rate on Capital Gains by Income (Ontario, 2026)

The marginal rate on a gain is half of the combined federal + Ontario bracket rate at that income level, because only 50% of the gain is taxable. These are the bracket rates this calculator applies; Ontario’s high-income surtax is not modelled.

You can offset capital gains with capital losses from other dispositions in the same year. Unused losses can be carried back three years or carried forward indefinitely. The Lifetime Capital Gains Exemption (LCGE) shelters up to $1,275,000 in 2026 for qualifying small business shares and farm/fishing property. Tax-loss harvesting — selling losing investments before year-end to realize losses — is a common strategy to reduce your net capital gains. Be aware of the superficial loss rule: if you repurchase the same security within 30 days, the loss is denied.

What Changed for 2026

• The inclusion rate is 50% for all gains. The two-tier system announced in the 2024 federal budget — 66.67% on annual gains above $250,000 — was formally cancelled on March 21, 2025 and never took effect. There is no $250,000 threshold to plan around.
• The Lifetime Capital Gains Exemption is $1,275,000 for 2026, covering qualified small business corporation shares and qualified farm or fishing property.
• The lowest federal rate is 14% (down from 15%, its level through 2024), which trims the tax on gains realized at low incomes: in Ontario’s bottom bracket a gain is taxed at about 9.5 cents per dollar — half of the 19.05% combined rate (14% + 5.05%).
• The top marginal rate on gains in Ontario is 23.08% under this calculator’s method — half of the 46.16% combined top bracket rate (33% federal + 13.16% provincial).
• The principal residence exemption is unchanged — a designated principal residence remains fully exempt, though the sale must still be reported on Schedule 3.

Worked Example: $40,000 Gain on a $75,000 Income (Ontario)

Suppose you earn $75,000 and sell shares for a $40,000 profit in 2026. Only half of the gain is taxable, and that taxable half stacks on top of your other income — it is taxed at your marginal bracket rates, from $75,000 up to $95,000:

Both slices stay within a single bracket because taxable income lands at $95,000 — below the next federal threshold ($117,045) and the next Ontario threshold ($107,785). If the taxable half of a larger gain crossed one of those lines, only the part above the line would be taxed at the higher rate; the calculator splits it across brackets automatically.

The Same $50,000 Gain at Different Incomes (Ontario, 2026)

Because the taxable half of a gain is added on top of your other income, the same profit costs very different amounts of tax depending on what you already earn. Here is a $50,000 capital gain (taxable portion $25,000) realized at four income levels:

At the $40,000 income level, part of the taxable gain fills what is left of the lowest brackets (14% federal to $58,523, 5.05% Ontario to $53,891) before spilling into the next ones — which is why the bill is $5,638.97 rather than a flat-rate figure. The spread is substantial: the same gain costs $5,901.03 more tax at $300,000 of income than at $40,000. That is why timing matters — realizing gains in a lower-income year (parental leave, a sabbatical, early retirement) can cut the rate on the gain by roughly half.