Capital Gains Tax Canada 2025: Rates, Rules, and Smart Tax-Saving Strategies
- Anamika Biswas
- 1 hour ago
- 4 min read
Capital gains tax planning is one of the most important — and often overlooked — areas of Canadian taxation. With proposed changes deferred until 2026, 2025 represents a critical planning year for investors, property owners, and business shareholders. Understanding how capital gains are taxed — and how to reduce that tax legally — can make a significant difference in your after-tax wealth.
Capital Gains Tax Highlights (2025)
Capital gains tax in Canada remains unchanged for 2025, providing a valuable planning window for investors and property owners. Only 50% of capital gains are taxable, principal residences continue to be exempt, and gains earned inside TFSAs remain completely tax-free. With proposed increases deferred until 2026, strategic planning in 2025 can significantly reduce future tax exposure.
Key highlights at a glance:
50% capital gains inclusion rate for individuals, corporations, and trusts
No capital gains tax on principal residences (with proper designation and reporting)
TFSA gains are 100% tax-free
Capital losses can offset capital gains
No increase to inclusion rates until at least 2026
Understanding these rules before selling investments or property can help you time transactions more effectively and avoid unnecessary tax.
What Is Capital Gains Tax?
A capital gain occurs when you sell a capital asset for more than its adjusted cost base (ACB).
Common capital assets include:
Stocks, ETFs, and mutual funds
Rental and investment properties
Cottages and vacation homes
Shares of private corporations
Capital gains are only taxed when realized (sold). Unrealized gains — increases in value you haven’t sold — are not taxable.
Capital Gains Tax Rate in Canada (2025)
Canada does not impose a separate capital gains tax rate. Instead, a portion of the gain is included in taxable income.
2025 Capital Gains Inclusion Rate
50% of capital gains are taxable
Applies to individuals, corporations, and trusts
Principal residences remain fully exempt
Although the federal government announced an increase to a 66.67% inclusion rate, implementation has been deferred until January 1, 2026. As a result, 2025 continues under the existing rules.
How Capital Gains Are Calculated
Formula:
Capital Gain = Selling Price – Adjusted Cost Base – Selling Expenses
Capital gain = Selling price – Adjusted cost base – Selling expensesExample
Purchase price: $500,000
Selling price: $750,000
Legal & selling costs: $25,000
Capital gain = $225,000Taxable portion (50%) = $112,500
That $112,500 is added to your income and taxed at your marginal rate.
Calculating capital gains correctly depends on your adjusted cost base (ACB) in Canada, especially for self-directed investors.
What Is a Capital Loss?
A capital loss occurs when an asset is sold for less than its ACB.
Capital losses can:
Offset capital gains in the same year
Be carried back 3 years
Be carried forward indefinitely
❗ Capital losses cannot be used against employment or business income.
Capital Gains and Registered Accounts
TFSA
Capital gains are 100% tax-free
Withdrawals do not affect income-tested benefits
RRSP / LIRA
Capital gains are tax-deferred
Withdrawals taxed as regular income
RESP
Growth is tax-deferred
Withdrawals taxed in the student’s hands
Using registered accounts correctly can eliminate capital gains tax entirely.
Capital Gains on Real Estate in Canada
Principal Residence
Your principal residence is fully exempt from capital gains tax if:
Properly designated
Reported on sale (mandatory reporting applies)
Rental & Investment Property
Capital gains do apply to:
Rental properties
Secondary homes
Vacant land
Short-term or long-term investment properties
Only 50% of the gain is taxable in 2025, but depreciation (CCA), ownership structure, and timing can significantly affect tax payable.
Smart Ways to Reduce Capital Gains Tax in 2025
1. Use Capital Losses Strategically
Match gains with losses to reduce net taxable income.
2. Plan the Timing of Asset Sales
Spreading sales across years can:
Lower marginal tax rates
Reduce exposure to future rule changes
3. Donate Appreciated Securities
In-kind donations of publicly traded securities:
Eliminate capital gains tax
Generate charitable tax credits
4. Avoid Superficial Losses
Rebuying identical assets within 30 days invalidates the loss under CRA rules.
5. Income-Split Where Permitted
Joint ownership with a spouse can spread capital gains across two tax returns.
Why 2025 Is a Critical Planning Year
With potential capital gains rule changes expected in 2026, 2025 allows taxpayers to:
Trigger gains at the lower inclusion rate
Reorganize corporate and personal holdings
Optimize real-estate ownership structures
Review registered vs non-registered investments
Planning to Sell Investments or Property in 2025?
A poorly timed sale can cost tens of thousands of dollars in unnecessary tax.
Cloud Accounting & Tax Services Inc. | CLaTAX provides:
Capital gains tax planning
Real-estate tax optimization
Investor & corporate restructuring advice
References
Canada Revenue Agency (CRA) – Capital GainsCRA guidance on capital gains, capital losses, inclusion rates, and reporting requirements under the Income Tax Act.
Canada Revenue Agency (CRA) – Principal Residence and Other Real EstateCRA rules on principal residence exemption, designation requirements, and mandatory reporting on disposition of real property.
Income Tax Act (Canada)Legislative authority governing capital property, taxable capital gains, inclusion rates, and loss utilization.
Department of Finance Canada – Capital Gains Inclusion Rate AnnouncementsFederal budget releases and legislative updates regarding proposed and deferred changes to capital gains taxation.
CPA Canada – Tax Planning for Individuals and InvestorsProfessional guidance on capital gains planning, real estate taxation, and investment structuring.
Frequently Asked Questions (FAQs)
Is capital gains tax changing in Canada in 2025?
No. The proposed increase to a 66.67% inclusion rate has been deferred until January 1, 2026.
How much capital gains tax do I pay on a rental property?
In 2025, 50% of the gain is taxable and added to your income.
Do I pay capital gains tax on my home?
No, if it qualifies as your principal residence and is properly reported.
Can capital losses reduce my employment income?
No. Capital losses can only offset capital gains.
Are capital gains taxable inside a TFSA?
No. All gains inside a TFSA are completely tax-free.