If you're selling a property in Canada in 2026, understanding the capital gains tax rules is essential. Here's the latest on what applies and what was cancelled.
Capital Gains Inclusion Rate: Stays at 50%
A previously proposed increase to the capital gains inclusion rate (from 50% to 66.67% for amounts above $250,000) was ultimately cancelled. As of 2026, the inclusion rate remains at 50% — meaning half of your capital gain is included in your taxable income.
Principal Residence Exemption
If you sell a home that was solely your principal residence for every year you owned it, you do not have to pay any tax on the gain. This exemption remains one of the most valuable tax benefits available to Canadian homeowners.
Property Flipping Tax (Since 2023)
Properties held for less than 365 consecutive days are subject to the property flipping rules. Any gain from selling a housing unit you owned for less than one year is deemed business income (not a capital gain), meaning 100% of the profit is taxable at your marginal rate. This applies unless the sale was due to specific life events (job relocation, death of a spouse, disability, etc.).
Underused Housing Tax: Eliminated
Following the November 2025 budget, the government moved to eliminate the Underused Housing Tax (UHT) for 2025 and beyond. This tax, which imposed a 1% annual levy on vacant or underused residential properties owned by non-residents and certain non-Canadians, has been repealed.
Lifetime Capital Gains Exemption
The Lifetime Capital Gains Exemption (LCGE) has been indexed to $1,250,000 for qualified small business shares. While this primarily applies to business owners, it can be relevant for those who hold real estate through corporate structures.
Key Takeaway for Sellers
If you're selling an investment property, plan for the 50% inclusion rate. If you've held the property for less than a year, be aware that the flipping rules mean 100% of your profit is taxable as business income. And if you're selling your primary home — the principal residence exemption means you likely owe nothing.
Tax planning is crucial when selling property. Consult with our team who can connect you with qualified tax professionals.