# How Capital Gains Are Taxed in Canada (2026) > How capital gains are taxed in Canada in 2026: the 50% inclusion rate, adjusted cost base, losses, the superficial loss rule and your home. Source: https://trykosh.com/learn/capital-gains-tax-canada Guide - Income tax # How capital gains are taxed in Canada When you sell shares, funds, crypto or a cottage for more than you paid, half of the gain is added to your income and taxed at your marginal rate. The 50% inclusion rate stays in place for 2026. Here's how to work out the gain, the tax, and the rules that change it. Updated October 31, 20264 min readBy the Kosh team On this page[What is the capital gains inclusion rate?](#inclusion)[Worked example](#example)[How to work out the gain: adjusted cost base](#acb)[How do capital losses work?](#losses)[What's exempt or sheltered](#exempt)[When are gains taxed as business income?](#business)[Foreign investments and US shares](#foreign)[When is the tax due?](#when-due)[FAQs](#faq) ## What is the capital gains inclusion rate? Only 50% of a capital gain is taxable (the **taxable capital gain**). It's added to your other income and taxed at your marginal rate, so the effective rate on a gain is roughly half your marginal rate. The proposal to raise the inclusion rate to two-thirds was cancelled, so 50% applies for 2026. ## Worked example Say you earn $100,000 in Ontario and sell shares for a $10,000 gain. $5,000 is added to your income, and your tax rises by about $1,574, an effective 15.7% of the gain (Kosh estimate). ## How to work out the gain: adjusted cost base Gain = proceeds of sale minus **adjusted cost base (ACB)** minus selling costs such as commissions. ACB is what you paid, including commissions, averaged across all identical shares you hold. Reinvested distributions and return-of-capital amounts change ACB, so track them; brokerage reports aren't always right, especially after transfers between institutions. ## How do capital losses work? A capital loss offsets capital gains in the same year. Unused net capital losses can be carried back three years (with Form T1A) or forward indefinitely, but only against taxable capital gains, not other income. Selling losing positions before year end to offset gains is called **tax-loss selling**. Beware the **superficial loss rule**: if you or an affiliated person (such as your spouse) buys the same or an identical property within 30 days before or after the sale and still holds it at the end of that period, the loss is denied and added to the ACB of the repurchased property instead. ## What's exempt or sheltered - **TFSA**: gains are never taxed. - **RRSP, RRIF and FHSA**: gains aren't taxed inside the plan; withdrawals are taxed as income (except qualifying FHSA withdrawals for a first home). - **Your principal residence**: the principal residence exemption can shelter the gain on your home. You must still report the sale on your return. - **Qualified small business shares and qualified farm or fishing property**: the lifetime capital gains exemption, set at $1.25 million in 2024, can shelter gains on qualifying sales. ## When are gains taxed as business income? If you buy and sell very frequently, hold for short periods or flip properties as a business, the CRA can treat the profits as **business income**, fully taxable rather than half. The line depends on your facts, such as how often you trade and why you bought; get advice if you trade heavily. ## Foreign investments and US shares Gains on foreign shares are worked out in Canadian dollars, using the exchange rates when you bought and when you sold, so currency moves affect your gain. If the total cost of your specified foreign property (which can include US shares held in a US brokerage account) is more than $100,000 at any time in the year, you must file Form T1135. ## When is the tax due? Gains are reported on Schedule 3 of your return for the year you sell. There's no withholding, so a big gain can mean a balance owing on April 30 and, if it repeats, instalments. Setting aside your marginal rate times half the gain when you sell avoids the April surprise. [Free tool**Capital gains tax calculator**Enter what you sold something for, what you paid and your other income to see the tax on the gain in your province. Half of a capital gain is taxable.](/tools/capital-gains-tax-calculator)[Free tool**Income tax calculator**Work out your 2026 federal and provincial income tax, CPP and EI, and what you keep, in any province or territory. Add self-employment income, capital gains and RRSP contributions to see how each one changes the bill.](/tools/income-tax-calculator)[Free tool**TFSA contribution room calculator**Add up every TFSA limit you've been eligible for since 2009, subtract what you've put in and add back past withdrawals to see the room you have today.](/tools/tfsa-contribution-room-calculator) **Where Kosh fits** Kosh reads your brokerage statements, keeps track of what you've sold, estimates the tax on realised gains for your province and flags losses you could use before December 31. It explains options; it doesn't recommend what to buy or sell. ## Frequently asked questions What is the capital gains tax rate in Canada? There is no separate rate. Half of the gain is added to your income and taxed at your marginal rate, so the effective rate is about half your marginal rate. Did the capital gains inclusion rate go up to two-thirds? No. The proposed increase was cancelled. The inclusion rate for individuals remains 50% for 2026. Do I pay capital gains tax on my house? Usually not, if it was your principal residence for every year you owned it, because the principal residence exemption covers the gain. You still have to report the sale on your tax return. How long can I carry forward capital losses? Indefinitely. Net capital losses can also be carried back three years. They can only be used against taxable capital gains, not employment or other income. What is the superficial loss rule? If you or an affiliated person, such as your spouse, buys the same or identical property within 30 days before or after selling it at a loss and still holds it at the end of that period, the loss is denied and added to the cost of the new property instead. ## Sources - [Finance Canada: Capital gains inclusion rate announcement (January 2025)](https://www.canada.ca/en/department-finance/news/2025/01/government-of-canada-announces-deferral-in-implementation-of-change-to-capital-gains-inclusion-rate.html) - [CRA: Guide T4037, Capital Gains](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html) - [CRA: Capital losses and deductions](https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-12700-capital-gains/capital-losses-deductions.html) - [CRA: Form T1A, Request for Loss Carryback](https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t1a.html) - [CRA: Questions and answers about Form T1135](https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/foreign-reporting/questions-answers-about-form-t1135.html) Written by the Kosh team and checked against the rules in force on October 31, 2026. This guide is general information, not tax, legal or investment advice. Kosh is an educational financial planning tool by Primedepth Labs. It is not registered with any Canadian securities regulator as an adviser or dealer, does not recommend specific securities, and does not hold your money or execute trades. Tax figures are estimates; confirm with the CRA or a qualified professional before acting. Investing carries risk. ## Upload your statement and Kosh does this for you. Kosh reads your bank, card and investment statements, estimates your federal and provincial tax and turns guides like this one into your own numbers and next steps. [Start free](/signup?via=learn-capital-gains-tax-canada)