A capital gain arises when you sell capital property for more than its adjusted cost base (ACB). The 2024 inclusion rate change makes this more important than ever.
The 2024 Inclusion Rate Change
Starting June 25, 2024, the federal government increased the capital gains inclusion rate from 1/2 to 2/3 for: all corporations and trusts, and individuals on gains exceeding $250,000/year. For individuals with gains under $250,000, the original 50% rate still applies.
Principal Residence Exemption
Your home is generally fully exempt from capital gains. Since 2016, you must file a T1 return and specifically designate the property on CRA Schedule 3 in the year of sale — even if fully exempt. Failure to designate can result in the exemption being denied.
Adjusted Cost Base (ACB)
Many investors overpay by underestimating their ACB. Your ACB includes the original price PLUS commissions, reinvested dividends, and capital improvements. Keep meticulous records — especially for dividend reinvestment plans.