This guide reflects the rules for the tax year ending December 31, 2025.
It applies to individuals filing their 2025 tax return in 2026.
Capital gains tax applies when you sell or dispose of capital property for more than you paid for it. This includes stocks, mutual funds, ETFs, cryptocurrency, real estate (other than your principal residence), and certain other investments. For 2025, the CRA has updated the capital gains inclusion rules, and this guide explains everything you need to know.
🧭 1. What Is a Capital Gain? #
A capital gain occurs when:
\[ \text{Proceeds of disposition} - \text{Adjusted cost base (ACB)} - \text{Selling expenses} > 0 \]If the result is negative, you have a capital loss.
Common examples of capital property:
- Stocks, ETFs, mutual funds
- Cryptocurrency
- Rental properties
- Land
- Bonds sold before maturity
- Units in a trust
- Certain business assets
📅 2. Capital Gains Inclusion Rate for 2025 #
For the 2025 tax year:
✔ 50% of your capital gain is taxable #
This means:
- If you earn a $10,000 capital gain
- Only $5,000 is added to your taxable income
This 50% inclusion rate applies to:
- Stocks and securities
- Crypto
- Real estate (non-principal residence)
- Business assets
- Precious metals
- Most other capital property
🧾 3. How to Report Capital Gains (Schedule 3) #
Capital gains are reported on:
- Schedule 3 — Capital Gains (or Losses)
- The result flows to Line 12700 of your T1 return
You must report:
- Date of acquisition
- Date of disposition
- Proceeds of disposition
- Adjusted cost base (ACB)
- Outlays and expenses (e.g., commissions)
Your tax software will calculate the taxable portion automatically.
🏠 4. Principal Residence Exemption (PRE) #
If you sell your principal residence, the gain is usually fully exempt.
To qualify:
- You must have ordinarily inhabited the property
- You must designate it as your principal residence for each year you owned it
Even though the gain is exempt, you must still report the sale on your tax return.
💼 5. Capital Gains on Real Estate (Non-Principal Residence) #
Taxable situations include:
- Rental properties
- Vacation homes
- Flipped properties
- Land
- Assignments of purchase contracts
You must report:
- Purchase price
- Selling price
- Renovation costs
- Legal fees
- Realtor commissions
🪙 6. Capital Gains on Cryptocurrency #
Crypto is treated as capital property unless you are running a business (then it may be business income).
Capital gains apply when you:
- Sell crypto for cash
- Trade one coin for another
- Use crypto to buy goods or services
You must track:
- ACB
- Proceeds
- Transaction fees
📉 7. Capital Losses #
If your capital losses exceed your gains:
- You can apply them against capital gains in the same year
- Carry them back three years
- Carry them forward indefinitely
Capital losses cannot be used to reduce regular income.
🧮 8. Example: Selling Stocks #
You bought shares for $12,000 and sold them for $20,000.
You paid $200 in commissions.
Capital gain calculation:
- Proceeds: $20,000
- ACB: $12,000
- Expenses: $200
Taxable portion (50%):
\[ 7,800 \times 0.50 = 3,900 \]You add $3,900 to your taxable income.
🧮 9. Example: Selling a Rental Property #
You bought a rental property for $300,000 and sold it for $420,000.
You spent $10,000 on renovations and paid $15,000 in selling costs.
- Proceeds: $420,000
- ACB: $300,000 + $10,000 = $310,000
- Expenses: $15,000
Taxable portion:
\[ 95,000 \times 0.50 = 47,500 \]You add $47,500 to your taxable income.
❓ 10. Frequently Asked Questions #
Do I pay capital gains tax if I don’t sell? #
No. Capital gains are only triggered when you dispose of the asset.
Do I pay capital gains tax on my principal residence? #
Usually no — but you must still report the sale.
Are crypto-to-crypto trades taxable? #
Yes. CRA treats them as dispositions.
Can I use capital losses to reduce employment income? #
No. They can only offset capital gains.
Do I need to report every stock sale? #
Yes — CRA receives your trading data from brokers.
