What the inclusion rate is
When you realize a capital gain, only a fixed portion of it is taxable — that portion is the inclusion rate. The taxable amount is added to your income and taxed at your marginal rate; the rest is received tax-free. So the headline tax on a gain is the inclusion rate times your marginal rate, not your marginal rate on the whole gain.
How the taxable amount is calculated
The arithmetic is simple once you have the rate:
- Capital gain = proceeds − adjusted cost base − outlays
- Taxable capital gain = capital gain × inclusion rate
- Tax = taxable capital gain × your marginal rate
All of the accuracy lives in the first line — specifically in the ACB. A wrong cost base changes the gain, which changes every number below it.
Losses use the same rate
Capital losses are included at the same rate as gains, which keeps the system symmetric: a loss offsets a gain dollar for dollar before the inclusion rate is applied. Net your gains and losses first, then apply the rate to the net figure. A net capital loss can’t reduce ordinary income — it carries back three years or forward indefinitely against other capital gains. See tax-loss selling in Canada for strategies.
Watch for tiered rates
Proposals have floated a higher inclusion rate above an annual threshold of net gains, with the lower rate applying below it. If a tiered structure is in effect for your year, large one-time dispositions can push part of a gain into the higher band — a reason to check timing and the current thresholds rather than assuming a single flat fraction.