Capital Gains Tax
Capital Gains Tax in Canada: 2025 Update & What You Need to Know
The capital gains tax in Canada remains a crucial consideration for investors, homeowners, and business owners. While an increase to the capital gains inclusion rate was originally set for mid-2024, the federal government has now deferred the change until January 1, 2026【1】. This gives taxpayers additional time to plan their financial strategies.If you’re buying or selling real estate in Muskoka, Georgian Bay, or anywhere in Ontario, understanding how capital gains tax works is essential—especially for luxury property owners and investors.What Is Capital Gains Tax?
Capital gains tax applies when you sell an asset for more than its original purchase price. It affects real estate, stocks, businesses, and certain investments, but your principal residence remains tax-exempt.For 2025, capital gains taxation in Canada follows these key rules:✅ Only 50% of capital gains are taxable
✅ The taxable portion is added to your income and taxed at your marginal rate
✅ Properties valued under $1,000 may be exempt from capital gains tax
✅ Cottages, investment properties, and rental units are subject to capital gains tax upon saleHowever, this will change on January 1, 2026, when the inclusion rate will increase from 50% to 66.67% for individuals earning over $250,000 in annual capital gains.
Capital Gains Tax Rates in Ontario (2025)
Ontario's capital gains tax rate depends on your total taxable income. Here’s a breakdown of the 2025 rates:Income RangeCapital Gains Tax Rate$0 - $15,7050.00%$15,706 - $18,0627.50%$18,063 - $23,72612.55%$23,727 - $51,44610.03%$51,447 - $55,86712.08%$55,868 - $90,59514.83%$90,596 - $102,89415.74%$102,895 - $106,73516.95%$106,736 - $111,73318.95%$111,734 - $150,00021.70%💡 Example Calculation:If you sell a Muskoka cottage with a $10,000 capital gain:
✔ Taxable amount = $10,000 × 50% = $5,000
✔ Added to your income and taxed based on your total income bracket
Key Exemptions & Strategies
✔ Primary Residence Exemption – If the property is your primary home, no capital gains tax applies.✔ Lifetime Capital Gains Exemption (LCGE) – $1.25 million exemption on eligible small business shares and farming/fishing properties.
✔ Canadian Entrepreneurs’ Incentive (2025) – New program reducing the tax burden for entrepreneurs on gains up to $2 million.
✔ Smart Real Estate Planning – Investors should consult tax professionals to maximize exemptions and plan for the 2026 tax rate increase.
What This Means for Real Estate Investors & Home Sellers
With Ontario’s luxury home market booming, sellers in Muskoka, Georgian Bay, and Toronto should consider listing properties before the tax increase takes effect in 2026. Buyers should also act strategically, taking advantage of current rates before capital gains taxes rise.Looking to Buy or Sell? Work with an Expert!
Navigating Ontario’s real estate market requires expert guidance, especially when factoring in tax implications. Realtor Jeffrey Braun, a top-rated luxury real estate agent in Muskoka & Georgian Bay, provides valuable insight on capital gains strategies, investment opportunities, and tax-smart transactions.📞 Contact Jeffrey Braun Today📍 Website: jeffreybraun.ca
📍 Luxury Listings: Corcoran Horizon Realty
📍 Phone: (705) 875-3443
📍 Email: jeffrey@corcoranhorizon.com
Final Thoughts
The Canadian capital gains tax landscape is changing, and now is the time to act. Whether you’re considering selling your Muskoka cottage, purchasing an investment property, or diversifying your portfolio, planning ahead can save you thousands in taxes. Get expert advice today!Links
- https://www.canada.ca/en/department-finance/news/2025/01/government-of-canada-announces-deferral-in-implementation-of-change-to-capital-gains-inclusion-rate.html- https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2025/update-cra-administration-proposed-capital-gains-taxation-changes.html- https://www.mltaikins.com/insights/navigating-the-uncertainty-of-capital-gains-tax-what-taxpayers-need-to-know/- https://turbotax.intuit.ca/tips/capital-gains-tax-in-canada-14192- https://amurcapital.ca/blog/capital-gains-tax-canada/- https://www.moneysense.ca/save/taxes/capital-gains-tax-explained/- https://www.canada.ca/en/department-finance/news/2024/06/fair-and-predictable-capital-gains-taxation.html- https://www.nesto.ca/mortgage-basics/canada-capital-gains-tax-calculator/- https://www.td.com/ca/en/investing/direct-investing/articles/capital-gains-tax- https://www.cfib-fcei.ca/site/capital-gains- https://www.scotiabank.com/ca/en/personal/advice-plus/features/posts.everything-you-need-to-know-about-capital-gains-tax-in-canada.html
