Find updates from the 2025 Federal Budget that may affect the information below here.
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The Canadian government has confirmed it won’t raise the capital gains inclusion rate as previously proposed in Budget 2024. Here’s what you need to know:
In Budget 2024, the government proposed raising the capital gains inclusion rate:
- From 50% to 66.67% for individuals with gains over $250,000, and
- From 50% to 66.67% for all capital gains earned by corporations and most trusts.
This increase was supposed to take effect on June 25, 2024, but was then delayed to January 1, 2026. Now, as of March 21, 2025, the government has confirmed that it is not moving forward with the change.
As a result, the capital gains inclusion rate remains at 50% for all taxpayers. There is no threshold above which a higher rate applies, and the existing rules continue to apply to capital gains realized in 2025 and beyond, unless further proposals are introduced.
Capital Gains Inclusion Rates: What’s Still Changing
While increased tax rates are no longer going to be applied, two key changes will still be taking place:
Higher Lifetime Capital Gains Exemption (LCGE)
If you’re selling shares of a qualified small business or family farm/fishing property, you can now shelter up to $1.25 million of capital gains from tax (up from $1,016,836). This change took effect June 25, 2024.
New Canadian Entrepreneurs’ Incentive
When this incentive is fully rolled out, entrepreneurs will have a combined full and partial exemption of at least $3.25 million when selling all or part of a business. The incentive will result in a one-third inclusion rate, and the limit will increase by $200,000 each year, starting in 2025, until it reaches $2 million in 2034.
How These Updates Affect You
Since the capital gains inclusion rate will remain at 50%, there is no need to trigger gains to avoid a tax hike. With these updates in mind, we recommend that you revisit your tax plan now that there’s more certainty.
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