How much is capital gains tax in Canada on property

Learn about Canada's 2026 capital gains tax on property, including taxable amounts, rates for residents and non-residents, and how to maximize your

Here are the essentials: when you sell Canadian property, half of the capital gain is treated as taxable income. You add that taxable half to your other income and pay tax at whatever federal and provincial marginal rates apply to you. Non-residents face a 25% withholding on sale proceeds unless they get a clearance certificate. Principal residences are often fully exempt if properly designated. Below: quick numbers, step-by-step calculation, costs and common mistakes — all in one place.

Quick-reference summary

- Capital gains inclusion rate: 50% (2026).

- Federal tax brackets (2026): 15% on taxable income up to $53,359; 20.5% to $106,717; 26% to $165,430; 29% to $235,675; 33% over $235,675.

- Non-resident withholding on Canadian real estate sales: typically 25% of sale proceeds unless a clearance certificate is obtained.

- Common selling costs: realtor commissions typically 4–6% of sale price; legal fees $500–$2,000.

- Tax filing deadline for most Canadians in 2026: April 30, 2026.

How capital gains tax on property works

When you sell a property that isn't fully sheltered by the principal residence exemption, the profit is a capital gain. Work out the gain by taking the sale price, subtracting your adjusted cost base (what you paid plus documented capital improvements) and then subtracting selling costs. Only half the gain is taxable — that’s called the inclusion rate. That 50% is added to your other taxable income and taxed at your marginal combined federal and provincial rate.

Step-by-step calculation (with numbers)

1) Calculate sale proceeds: the gross amount you receive. Example: sale price $800,000.

2) Determine ACB: purchase price plus documented capital improvements and acquisition costs. Example: purchased for $500,000 and $40,000 in renovations → ACB = $540,000.

3) Subtract selling costs (realtor, legal). Example: 5% commission on $800,000 = $40,000; legal fees $1,200 → net proceeds = $800,000 - $40,000 - $1,200 = $758,800.

4) Capital gain = net proceeds - ACB = $758,800 - $540,000 = $218,800.

5) Taxable capital gain = 50% of $218,800 = $109,400. That amount gets added to your taxable income.

6) How much you pay depends on your marginal rate: for example, at a 35% rate you'd owe $38,290 on a $109,400 taxable gain.

Examples at common gain sizes

- $25,000 gain → taxable $12,500. Tax at 20% = $2,500.

- $50,000 gain → taxable $25,000. Tax at 26% = $6,500.

- $100,000 gain → taxable $50,000. Tax at 20.5% = $10,250; at 33% = $16,500.

- $250,000 gain → taxable $125,000. Tax at 29% = $36,250.

- $1,000,000 gain → taxable $500,000. If combined marginal rate is about 53%, tax ≈ $265,000.

Reporting, forms and deadlines

Sure, when you sell a property you must report the disposition on your income tax return for the year of the sale. If you claim a principal residence exemption, you use the CRA forms required to designate the property — keep records of purchase price, receipts for capital improvements, closing statements and selling costs.

Key procedural points: the sale is reported on Schedule 3 and the principal residence designation is completed on the appropriate CRA worksheet. The general filing deadline for most individuals is April 30, 2026.

Principal residence exemption (PRE)

If the property was your principal residence for every year you owned it, the full capital gain may be shelved — zero tax. But only one property per family unit can be designated as a principal residence for any given year. Also, short-term rental income or carrying on a business from the property can limit or remove the exemption.

Special rules and calculations apply for periods of ownership that include years when the property wasn't your principal residence or when only part of the property was used to earn income. If you lived in the home for a few months in a given year it might still qualify as your principal residence, but the specific facts and record-keeping will determine the outcome.

Non-residents selling Canadian property

If you're a non-resident selling Canadian real estate, buyers may withhold part of the proceeds and remit it to the CRA unless you arrange a clearance certificate beforehand — check the CRA rules well ahead of closing. The seller must file an income tax return to determine the actual tax owing; any excess withheld is refunded or additional tax may be payable. The application for a clearance certificate uses CRA procedures and takes time — plan for weeks or months if necessary.

Costs and fees to budget

- Realtor commissions: typically 4%–6% total. On a $700,000 house, 5% = $35,000.

- Legal fees: $500–$2,000 depending on complexity.

- Home staging and minor repairs: $1,000–$10,000 typical ranges.

- Capital gains tax examples above: on $100,000 gain you might pay $10,250–$16,500 depending on your marginal rate.

Common mistakes to avoid

- Treating all profit as taxable without subtracting selling costs and ACB. Those reduce the capital gain.

- Failing to claim the principal residence exemption correctly — only one property per household per year can be designated.

- Assuming short ownership means a capital gain — if you owned a property less than 12 months and were effectively in the business of flipping, the CRA may treat profit as business income, which is 100% taxable.

- Non-resident sellers not applying for clearance certificates and getting hit with 25% withholding on gross proceeds.

Regional differences and examples

Your province affects the final tax bill: half the gain is taxable everywhere, but you'll owe federal and provincial tax. A simple way to estimate is to combine the federal rate that applies to you with the provincial rate at that income level. For example, if after adding the $109,400 taxable capital gain your top federal bracket portion is 29% and your provincial rate at that income slice is 11%, your combined rate is about 40% and the tax on the taxable gain is 0.40 × $109,400 = $43,760.

Because provincial rates vary, two sellers with identical nominal gains can pay materially different tax amounts — often differing by thousands of dollars.

Alternatives and planning moves

- Use the principal residence exemption when eligible — designate the correct years.

- Time the sale to keep the taxable capital gain in a lower marginal bracket — for example, sell in a year with lower earned income.

- Keep records of capital improvements — properly documented renovations increase ACB and reduce gain.

- For non-residents: apply for a clearance certificate to avoid large withholdings at closing.

Forecast — what to watch for in 2026

Policy discussions around taxing capital gains more heavily come up regularly. An increase in the inclusion rate from 50% to a higher level would directly raise tax bills: for a $200,000 nominal gain, taxable portion would rise from $100,000 to $150,000 if inclusion moved to 75% — a direct 50% increase in taxable amount. Watch federal budgets, provincial budgets and election platforms for any proposed changes. But as of the 2026 tax year, the inclusion rate remains 50% and federal brackets listed above apply.

Calculating how much capital gains tax you’ll pay on a property sale is simple in formula but complex in practice — you need the right ACB, to account for selling costs, to know whether the principal residence exemption applies, and to understand your marginal rate once the taxable half of the gain is added to your income. For many Canadians the PRE means no tax at all. For others, expect to pay tax on 50% of the gain at your combined federal and provincial marginal rate — and non-residents should plan for a 25% withholding unless they secure a clearance certificate.

This article was created with AI assistance.

How much is capital gains tax in Canada on property — 2026