Key Takeaways
- 1.A $200,000 capital gain falls entirely below the $250K threshold — it is included at 50% under both old and new rules. An Ontario investor at $100K income pays approximately $37,980 in tax on this gain regardless of which regime applies.
- 2.A $350,000 capital gain crosses the threshold: $250K at 50% and $100K at 66.67%. The new rules add roughly $8,925 in extra tax compared to the old uniform 50% rate for a top-bracket Ontario taxpayer.
- 3.The $250,000 threshold is per person, per year. Couples can double it to $500K by holding assets jointly. Spreading a sale across two calendar years can keep the entire gain at 50%.
- 4.The lifetime capital gains exemption ($1.25M in 2025 for QSBC shares) eliminates the gain before the threshold calculation — exempted gains do not count toward the $250K.
- 5.Transition rule: only gains realized on or after June 25, 2024 are subject to the new two-tier inclusion. The CRA uses the settlement date, not the trade date, for publicly traded securities.
How the Two-Tier Inclusion Rate Works
Before June 25, 2024, all capital gains in Canada were included at a flat 50%. You realized a $500,000 gain, you reported $250,000 as taxable income. Simple.
The new system splits the inclusion into two tiers for individuals:
| Gain Portion | Inclusion Rate | Taxable Per $1 of Gain |
|---|---|---|
| First $250,000 of net capital gains | 50% | $0.50 |
| Gains above $250,000 | 66.67% | $0.6667 |
| Corporations and trusts (all gains) | 66.67% | $0.6667 |
Corporations and most trusts do not receive the $250,000 threshold. Every dollar of capital gains is included at 66.67%. Graduated rate estates and qualified disability trusts are exceptions that receive the individual threshold.
The “net” in net capital gains matters. Capital losses from the same year reduce the gain before the threshold is applied. If you realize $350,000 in gains and $120,000 in losses, your net capital gain is $230,000 — entirely below the $250K threshold, fully included at 50%.
Scenario 1: $200,000 Capital Gain — No Change Under New Rules
An Ontario investor sells a rental condo for a $200,000 capital gain. Since $200,000 is below the $250,000 threshold, the entire gain is included at 50% — identical to the old rules. The investor's taxable capital gain is $100,000 regardless of which regime applies.
Here is the incremental tax on that $100,000 taxable capital gain at three employment income levels:
| Employment Income | Taxable CG Added | Federal Tax on CG | Ontario Tax on CG | Total Tax on $200K Gain |
|---|---|---|---|---|
| $100,000 | $100,000 | $26,435 | $11,543 | $37,978 |
| $150,000 | $100,000 | $28,044 | $12,160 | $40,204 |
| $200,000 | $100,000 | $30,380 | $12,910 | $43,290 |
Federal and Ontario rates based on 2025 published brackets. Ontario surtax included where applicable. These figures represent the incremental tax caused by the capital gain — not the investor's total tax bill. For a broader look at Ontario take-home pay mechanics, see our Ontario income tax take-home calculator.
The critical takeaway: a $200,000 gain is entirely unaffected by the 2025 inclusion rate change. If your annual capital gains stay below $250,000, you are operating under the same 50% inclusion that has existed since 2000.
Scenario 2: $350,000 Capital Gain — Where the New Rate Bites
Now the same Ontario investor sells a cottage for a $350,000 capital gain. The first $250,000 is included at 50% ($125,000 taxable) and the remaining $100,000 at 66.67% ($66,670 taxable). Total taxable capital gain: $191,670.
Under the old uniform 50% rate, the taxable amount would have been $175,000. The new rules add $16,670 in extra taxable income.
| Employment Income | Tax (New Rules) | Tax (Old 50%) | Extra Tax from New Rules |
|---|---|---|---|
| $100,000 | $73,652 | $66,248 | +$7,404 |
| $150,000 | $80,936 | $72,462 | +$8,474 |
| $200,000 | $87,518 | $78,593 | +$8,925 |
The extra tax ranges from ~$7,400 to ~$8,925 depending on income level. The higher your other income, the more of the extra $16,670 in taxable income lands in top brackets. For a detailed cottage sale scenario, see our Ontario cottage capital gains calculator.
Line-by-Line Breakdown: $350K Gain at $150K Income
Capital gain: $350,000
Step 1 — Apply the two-tier inclusion:
First $250,000 × 50% = $125,000 taxable
Remaining $100,000 × 66.67% = $66,670 taxable
Total taxable capital gain: $191,670
Step 2 — Add to employment income:
$150,000 salary + $191,670 taxable CG = $341,670 total taxable income
Step 3 — Federal tax on the $191,670 CG portion:
$150,000 to $158,468 = $8,468 × 26% = $2,202
$158,468 to $221,708 = $63,240 × 29% = $18,340
$221,708 to $341,670 = $119,962 × 33% = $39,587
Federal on CG: ~$60,129
Step 4 — Ontario tax on the $191,670 CG portion:
$150,000 to $220,000 = $70,000 × 12.16% = $8,512
$220,000 to $341,670 = $121,670 × 13.16% = $16,012
Ontario surtax adjustment: ~$2,283
Ontario on CG: ~$26,807 (incl. surtax)
Combined tax on $350K gain: ~$80,936
Effective tax rate on the $350K gain: ~23.1%
Under the old 50% uniform rate, the taxable capital gain would be $175,000 instead of $191,670, and the combined tax would be approximately $72,462. The new rules cost this investor an extra $8,474.
Effective Capital Gains Tax Rates by Income Level
The effective tax rate on a capital gain is the combined federal-plus-Ontario marginal rate multiplied by the inclusion rate. Here are the effective rates for different income levels under both the 50% and 66.67% inclusion:
| Taxable Income Level | Combined Marginal Rate | CG Rate at 50% | CG Rate at 66.67% |
|---|---|---|---|
| $55,000–$105,000 | 29.65% | 14.83% | 19.77% |
| $105,000–$115,000 | 31.48% | 15.74% | 20.99% |
| $115,000–$150,000 | 33.89% | 16.95% | 22.60% |
| $150,000–$220,000 | 43.41% | 21.70% | 28.94% |
| $220,000+ | 53.53% | 26.76% | 35.69% |
Ontario rates include surtax. The jump from 50% to 66.67% inclusion at the top bracket increases the effective capital gains rate from 26.76% to 35.69% — an 8.93 percentage point increase on each dollar of gain above $250K. For how these rates compare when optimizing registered accounts, see our RRSP vs TFSA Ontario tax comparison.
Which Gains Are Still at 50%? The $250K Threshold in Practice
The $250,000 threshold applies to net annual capital gains for individuals. Here is what stays fully at 50%:
- Any capital gain under $250,000 in a tax year (after subtracting capital losses)
- The first $250,000 of a larger gain
- Gains sheltered by the principal residence exemption (no inclusion at all)
- Gains covered by the lifetime capital gains exemption (no inclusion at all)
And what triggers the 66.67% rate:
- Individual net capital gains above $250,000 in a single tax year
- All capital gains in a corporation (no threshold)
- All capital gains in a trust other than a graduated rate estate or qualified disability trust
For many Ontario investors, the practical impact is zero. If your only capital event is selling a few thousand dollars of ETFs or stocks each year, you will never approach the $250K threshold. The new rate targets large one-time events: selling a rental property, liquidating a concentrated stock position, or disposing of business shares. For a worked example of the LCGE on a business sale, see our Ontario small business sale tax calculator.
Lifetime Capital Gains Exemption: How It Interacts with the $250K Threshold
The lifetime capital gains exemption (LCGE) shelters qualifying gains up to $1,250,000 in 2025 for qualified small business corporation (QSBC) shares, and $1,250,000 for qualified farm and fishing property. The key interaction:
Example: $500,000 gain on QSBC shares + $100,000 gain on rental property
QSBC gain: $500,000 — fully sheltered by LCGE = $0 taxable
Rental gain: $100,000 — no LCGE, subject to inclusion
Net capital gain subject to inclusion: $100,000
Since $100,000 < $250,000 threshold: all at 50% = $50,000 taxable
Without the LCGE:
Total gain: $600,000
First $250,000 × 50% = $125,000
Remaining $350,000 × 66.67% = $233,345
Total taxable: $358,345
LCGE saves: $308,345 in taxable income
At top Ontario rate (~53.53%): ~$165,038 in tax savings
The LCGE does not merely reduce the gain dollar-for-dollar — it eliminates the gain before the $250K threshold is applied. This means the LCGE effectively prevents non-qualifying gains from being pushed into the 66.67% tier. It is the single most powerful tool for Ontario business owners facing large dispositions.
CRA Transition Rules: Before vs. After June 25, 2024
The new inclusion rate applies to dispositions on or after June 25, 2024. The CRA's transition rules create three categories:
| Disposition Date | Inclusion Rate | Notes |
|---|---|---|
| Before June 25, 2024 | Flat 50% | Old rules apply to full gain |
| On or after June 25, 2024 | 50% / 66.67% two-tier | $250K threshold applies |
| 2024 tax year (mixed) | Both rates may apply | Separate calculation periods |
For publicly traded securities, the CRA uses the settlement date, not the trade date. Under T+1 settlement rules effective May 2024, a stock sold on June 24 settles on June 25 — which would make it subject to the new inclusion rate. Verify settlement dates on your trade confirmations.
The 2024 Split-Year Problem
For the 2024 tax year, gains realized before June 25 and gains realized on or after June 25 are calculated separately. The $250,000 threshold applies only to post-June-25 gains. If you realized $200,000 in gains before June 25 (all at 50%) and $300,000 after June 25 (first $250K at 50%, next $50K at 66.67%), each period is computed independently — the pre-June-25 gains do not consume your $250K threshold.
Worked Example: GTA Rental Condo Sale — $400,000 Gain
A Toronto investor purchased a Yonge & Eglinton condo in 2015 for $400,000 (adjusted cost base including land transfer tax and legal fees). They sell in 2025 for $800,000 — a $400,000 capital gain. The investor earns $150,000 in employment income.
Step 1 — Adjusted cost base:
Purchase price: $400,000
Land transfer tax (Toronto double tax): $12,950
Legal fees: $2,000
ACB: $414,950
Step 2 — Capital gain:
Selling price: $800,000
Less: real estate commission (5%): $40,000
Less: legal fees on sale: $1,500
Net proceeds: $758,500
Capital gain: $758,500 − $414,950 = $343,550
Step 3 — Two-tier inclusion:
First $250,000 × 50% = $125,000
Remaining $93,550 × 66.67% = $62,379
Total taxable capital gain: $187,379
Step 4 — Under old 50% rate:
$343,550 × 50% = $171,775 taxable
Extra taxable income from new rules: $15,604
At top combined rate (~53.53%): ~$8,352 additional tax
The $8,352 is meaningful but not catastrophic. However, if this investor also realized gains from selling stocks in the same year, the $250K threshold would already be partially consumed by the condo gain — pushing more of the stock gains into the 66.67% tier. Timing dispositions across calendar years is the primary planning lever.
Planning Strategies: How to Stay Below $250K
Ontario investors facing large unrealized gains have several tools:
- Multi-year disposition planning: Sell appreciated assets across two or more calendar years. A $500K gain split into $250K per year stays entirely at 50% inclusion, saving approximately $8,925–$17,850 vs. realizing the full amount in one year.
- Spousal transfers at ACB: Transfer assets to a spouse at adjusted cost base (no gain triggered). When the spouse later sells, they get their own $250K threshold. Be aware of attribution rules — gains on transferred assets may attribute back to the transferor.
- Capital loss harvesting: Realize losses to offset gains in the same year, reducing the net gain below $250K. Losses can be carried back three years or forward indefinitely.
- Charitable donation of appreciated securities:Donating publicly traded securities to a registered charity eliminates the capital gains tax entirely (no inclusion at either rate) and provides a donation tax credit.
- Principal residence exemption: If you qualify for the PRE on a property, the gain is fully exempt — it does not count toward the $250K threshold at all.
For investors with unrealized losses, our tax loss harvesting calculator walks through the mechanics and deadlines.
Corporate and Trust Gains: No $250K Threshold
One of the most significant aspects of the 2025 change: corporations and trusts have no $250,000 threshold. Every dollar of capital gains is included at 66.67%. For Ontario investors who hold rental properties or investment portfolios inside a holding company, this changes the math substantially.
$350,000 capital gain inside a corporation:
Old rules: $350,000 × 50% = $175,000 taxable
Corporate tax (refundable): $175,000 × 50.17% = $87,798
New rules: $350,000 × 66.67% = $233,345 taxable
Corporate tax (refundable): $233,345 × 50.17% = $117,047
Extra corporate tax: ~$29,249
Note: Part of this tax is refundable when dividends are paid out to individual shareholders. The net after-tax cost depends on integration with personal taxes.
The corporate rate increase is front-loaded — the corporation pays more tax upfront, and the refundable portion is only recovered when dividends are distributed. For Ontario holdcos with substantial unrealized gains, the timing of asset sales has become significantly more consequential.
Important Disclaimer
This article provides general information about the capital gains inclusion rate changes effective for dispositions on or after June 25, 2024. It is not financial, tax, or legal advice. The two-tier inclusion rate (50% on the first $250,000 and 66.67% above) applies to individuals; corporations and most trusts face 66.67% on all gains. Federal and Ontario provincial tax brackets, the lifetime capital gains exemption limit, and CRA administrative practices are set by their respective governments and subject to change. Tax calculations are estimates based on 2025–2026 published rates and may not reflect your specific situation. The settlement date (not trade date) determines which inclusion rate applies to publicly traded securities. Capital loss carryover rules, attribution rules for spousal transfers, and the principal residence exemption have specific conditions that may affect your outcome. Consult a licensed tax professional or financial advisor before making investment or disposition decisions based on this information.