Julia VachonOn October 5, 2026 — the same day the CRA deposited the first Canada Groceries and Essentials Benefit payment of the quarter — a less visible development is costing thousands of Canadian investors real money. Since January 1, 2026, Canada's capital gains inclusion rate has split in two: 50% on the first $250,000 of annual gains for individuals, and 66.67% on every dollar above that threshold. Corporations and most trusts now face 66.67% on all capital gains, full stop.
Nine months into the new regime, the tax numbers are concrete enough to measure.
How the Split Inclusion Rate Reshapes Your Tax Bill
Canada's capital gains tax has never worked the way most people picture it. You don't pay tax on the full gain — you include a percentage of it in your taxable income, then pay your marginal rate on that amount. Under the 50% inclusion rate that applied through December 31, 2025, a $300,000 capital gain added $150,000 to your income. Under the 2/3 inclusion rate now in force, that same gain adds $200,000.
The taxable income number has jumped by $50,000 — but only for gains above the $250,000 annual threshold. Gains that stay below that level face no change. The higher rate bites on the excess only.
| Gain amount | Under 50% inclusion | Under 2/3 inclusion | Extra income included |
|---|---|---|---|
| $250,000 | $125,000 | $125,000 | $0 |
| $300,000 | $150,000 | $175,000 | +$25,000 |
| $500,000 | $250,000 | $291,667 | +$41,667 |
| $1,000,000 | $500,000 | $625,000 | +$125,000 |
At Ontario's combined federal-provincial top marginal rate of approximately 53.53%, every additional $1,000 of capital gains income above the $250,000 threshold now costs $357 more in tax compared to 2025 — a 33% increase in the effective rate on that slice. British Columbia and Quebec investors face similar math at their respective top rates.
Corporations Got No Threshold Protection
Individual investors at least benefit from the $250,000 annual exemption floor. Corporations and most trusts do not. For any business holding investment property, real estate, or securities inside a corporation, every dollar of capital gain realized in 2026 is included at 66.67% — no threshold, no exceptions.
This caught many small business owners off guard in early 2026. A professional corporation in Alberta that holds a commercial property purchased for $180,000 in 2008, now worth $620,000, would realize a $440,000 capital gain on sale. Under the old rules, $220,000 entered the corporation's income. Under the new rules, the figure is $293,333 — an extra $73,333 of corporate income taxed at the combined small business rate.
According to Canada Revenue Agency guidance on the capital gains inclusion rate changes, the change was designed to align investment and corporate tax treatment more closely. The Lifetime Capital Gains Exemption (LCGE), raised to $1.25 million for eligible small business shares and qualifying farm or fishing property, remains intact. So does the Entrepreneurs' Incentive — a one-third inclusion rate on up to $2 million in lifetime eligible gains for qualifying founders. But neither of these helps the typical investor holding property or a stock portfolio inside a holding company.
The $380,000 Rental Property: What the Numbers Actually Look Like
Take Marie and André from Ottawa. They bought a rental duplex in 2009 for $220,000. The property is now worth $600,000. After accounting for selling costs and capital cost allowance recapture, their net capital gain on a sale this fall comes to approximately $380,000.
If they had sold on December 30, 2025:
- Full $380,000 gain at 50% inclusion = $190,000 added to combined income
- At Ontario's 53.53% top marginal rate = approximately $101,707 in total capital gains tax
Selling in October 2026 instead:
- First $250,000 of gain at 50% inclusion = $125,000 added to income
- Remaining $130,000 of gain at 66.67% inclusion = $86,667 added to income
- Total income included = $211,667
- At 53.53% marginal rate = approximately $113,303 in total capital gains tax
The difference is $11,596 in additional tax on the same property sale. That is not a rounding error. For a couple building retirement income, $11,596 is more than one year of additional TFSA contribution room — simply gone because the timing crossed into 2026.
The if/then logic is direct: if Marie and André had consulted a wealth advisor in late 2025 about crystallizing the gain before year-end, the tax outcome would have been materially better. For investors in a similar position today who have not yet sold, year-end planning strategies can still reduce the total liability — but only if acted on before December 31, 2026.
CRA's 7% Overdue Interest Rate Adds a Second Layer of Pressure
For Canadians who already carry an outstanding balance with the CRA, October 2026 adds a compounding cost. The CRA's prescribed interest rate on overdue income tax balances is 7% for Q4 2026. At that rate, a $50,000 outstanding tax debt accumulates $3,500 in interest annually — before any penalties.
This matters for investors who realized large gains in early 2026 and did not adjust their quarterly instalment payments to reflect the higher 2/3 inclusion rate. Many will arrive at April 2027 with a balance owing that significantly exceeds their estimates. A wealth management professional can model the instalment payment strategy most likely to eliminate or reduce interest exposure before the tax year closes.
According to data from immigrationnewscanada.ca, October 2026 delivers five separate CRA benefit payments within a single three-week window — including today's Canada Groceries and Essentials Benefit. For lower-income Canadians, those payments are meaningful. For investors managing larger portfolios, the more significant number this month may well be the 7% overdue interest rate and the December 31 deadline that is now less than 90 days away.
What Investors Can Still Do Before December 31, 2026
Despite the inclusion rate increase, several practical planning levers remain available through year-end.
Capital loss harvesting. If your portfolio contains unrealized losses, selling those positions before December 31 offsets capital gains dollar-for-dollar — including gains taxed at the 2/3 rate. The superficial loss rules prevent repurchasing the identical security within 30 days, but a parallel position in a comparable ETF can preserve market exposure while the tax loss is recognized.
Lifetime Capital Gains Exemption review. If you hold qualifying small business shares, the $1.25 million LCGE represents the single most powerful capital gains shelter in the Canadian tax code. A wealth advisor can confirm eligibility, review your corporate structure, and identify whether a sale, share gift, or estate freeze could put that exemption to work before year-end.
Income splitting and spousal planning. If only one partner has exceeded the $250,000 capital gains threshold in 2026, ensuring future gains are structured to land in the lower-income partner's hands — through a properly documented spousal loan or family trust — can keep more of next year's gains below the threshold. Attribution rules apply, and the loan must charge the CRA's prescribed interest rate to be effective.
Corporate pipeline planning for holdco owners. For professionals and business owners with investment portfolios inside a holding company, a tax pipeline strategy — combining capital dividends from the company's Capital Dividend Account with estate planning and progressive withdrawals — can extract after-tax corporate retained earnings at more favourable personal rates over time. This approach requires careful setup and typically takes 12 to 36 months to execute fully, making this year's conversations the ones that determine 2027 and 2028 outcomes.
The CRA's rules in each of these areas are technical, and missteps can trigger reassessments or denied deductions. Consulting a qualified wealth management professional at ExpertZoom before December 31 gives investors the time to model different scenarios and choose the strategies with the strongest after-tax outcomes for their specific situation. You can also review related considerations in our article on Bitcoin sales and capital reporting obligations in Canada — the same inclusion rate logic applies to any capital property, digital or physical.
This article provides general financial information about Canada's capital gains inclusion rate changes. It does not constitute tax or financial advice. Tax situations vary significantly based on personal income, province, asset type, and corporate structure. Consult a qualified wealth management or tax professional before making financial decisions.
