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Capital gains calculator (Canada)
Ontario's capital gains tax is calculated at the federal level using Canada's inclusion rate system — 50% of a capital gain is included in taxable income in 2026. The proposed higher 66.67% inclusion rate on gains above $250,000 was cancelled in March 2025, so the 50% rate applies to the full gain. Ontario residents pay combined federal and provincial tax on the included portion, with effective tax rates on capital gains ranging from approximately 20–26% for those earning $50,000 to 30–35% for those earning $150,000. Your principal residence is generally fully exempt from capital gains tax if properly designated.
Illustrative only — federal rules + Ontario tax on the included amount; confirm with CRA and a tax professional.
Include legal fees, agent commissions, transfer taxes — rolled into adjusted cost base in this model.
Used to estimate your marginal tax rate.
Renovations, additions — not maintenance.
Tax owed (estimate)
$25,374
Effective rate: 18.4%
Net proceeds after tax
$512,626
| Annual Net Capital Gain | Inclusion Rate | Taxable Portion |
|---|---|---|
| First $250,000 | 50% | $125,000 on $250K gain |
| Above $250,000 | 50% | $50,000 on each additional $100K |
| Income Before Gain | Marginal Rate | Effective Tax on Capital Gain |
|---|---|---|
| $50,000 | ~40–52% combined | ~20–26% of the gain |
| $100,000 | ~46–53% combined | ~23–27% of the gain |
| $150,000 | ~53–60% combined | ~27–30% of the gain |
| $250,000+ | ~60%+ combined | ~30–35% of the gain |
Ontario's combined federal + provincial tax rate applies to the included portion of the capital gain. At $100,000 income, if you sell an investment property for a $200,000 gain, 50% ($100,000) is included in your income. At a combined marginal rate of approximately 46%, you pay roughly $46,000 in tax on the gain — an effective rate of 23% on the full $200,000 gain.
Your principal residence is generally fully exempt from capital gains tax in Ontario. To qualify: the property must be your principal residence for every year you owned it, you must designate it as your principal residence when you file, and you can only designate one property per family unit per year. Even if the gain is fully exempt, you must still report the sale to CRA on Schedule 3. You cannot claim the principal residence exemption on rental or investment properties — only your primary home qualifies.
Rental and investment properties do not qualify for the principal residence exemption. The full capital gain is subject to Ontario's inclusion rate rules. Additionally, any capital cost allowance (CCA/depreciation) you previously claimed on the property is recaptured as ordinary income — not as a capital gain — when you sell. This means your tax bill on selling a rental property has two components: the capital gain (taxed at 50% inclusion) plus depreciation recapture (taxed as 100% ordinary income).
| Item | Amount |
|---|---|
| Purchase price | $600,000 |
| Sale price | $1,000,000 |
| Capital gain | $400,000 |
| Inclusion rate (50%) | $200,000 included in income |
| Combined tax rate (~46% at $100K income) | ~$92,000 tax on gain |
| Effective rate on full gain | ~23% |
In Ontario, 50% of a capital gain is included in taxable income, regardless of the size of the gain. The proposed 66.67% inclusion rate on gains above $250,000 was cancelled in March 2025. The actual tax rate depends on your marginal tax rate — at $100,000 income, the effective tax on a capital gain is approximately 23–27% of the full gain.
Your principal residence is generally exempt from capital gains tax in Ontario. You must designate the property as your principal residence when filing and report the sale to CRA on Schedule 3. Only one property per family unit can be designated per year. Rental and investment properties do not qualify for the exemption.
The inclusion rate is 50% of annual net capital gains. The federal government cancelled the proposed increase to 66.67% on gains above $250,000 in March 2025, so large gains are also included at 50% and taxed at Ontario's combined federal + provincial rates.
When selling a rental property in Ontario, you pay tax on two components: the capital gain (50% inclusion rate) and depreciation recapture (100% included as ordinary income). The capital cost allowance (CCA) you claimed over the years is fully recaptured as income. This makes rental property sales significantly more expensive from a tax perspective than selling a principal residence.
Strategies to reduce Ontario capital gains tax include: using your principal residence exemption, contributing capital gains to an RRSP to offset the taxable income, spreading gains across multiple tax years, using capital losses to offset gains, and donating appreciated securities to charity (which eliminates the capital gain entirely).
The Lifetime Capital Gains Exemption (LCGE) in Canada allows individuals to exempt up to $1,250,000 (2026 limit, indexed annually) of capital gains on the sale of qualifying small business shares or qualifying farm/fishing property. This exemption does not apply to real estate investment properties or publicly traded stocks.
Educational estimates only. Not tax advice.