Sell an investment for a profit? Only half of it is taxed.
In Canada, a capital gain is taxed more lightly than a paycheque. Here is how the tax is worked out, in plain words.
How it works, in three steps
- 1Work out your gain. Take what you sold the investment for and subtract what you paid for it, including fees. That difference is the capital gain.
- 2Half of the gain counts as income. The share that is taxable is called the inclusion rate. For individuals in 2026 it is 50%.
- 3That half is taxed at your normal rate. It is added to your other income for the year, so the tax on the whole gain works out to about half of your marginal rate.
You only owe the tax in the year you sell. A gain you have not sold yet is not taxed.
A simple example
You bought shares for $10,000 and sold them for $15,000. The gain is $5,000. Half of it, $2,500, is added to your income.
In a 40% tax bracket that costs $1,000 in tax, which is 20% of the gain. The figures are round numbers for illustration; your province and income change the answer.
Where does it apply?
It applies to
- Stocks, ETFs and mutual funds in a regular (non-registered) account
- Second homes, cottages and rental property
- Crypto and other investments you sell for more than you paid
It usually does not apply to
- Anything inside an RRSP or TFSA, where growth is sheltered
- Your principal residence, which is generally exempt if you designate it correctly
- Investments you have not sold yet
The honest catches
- A big gain can push you into a higher bracket. The taxable half is stacked on top of your other income, so selling a lot in one year costs more per dollar.
- Losses can help. Capital losses cancel gains of the same year and can be carried back three years or forward with no expiry. The tax-loss harvesting path covers this.
- You need your cost base. Without records of what you paid, you cannot work out the gain. The next quick guide covers it.
This is education, not tax, legal or investment advice. Talk to a licensed Canadian chartered professional accountant or certified financial planner before you act.
See the tax on your own gain
Enter the gain, your other income and your province for an estimate using the 2026 brackets.
Open the Capital Gains Tax Calculator