Capital Gains on Selling Property in Ontario: 2026 Guide
Understanding capital gains is essential for anyone selling a property that is not their principal residence. Here is how it works in Ontario in 2026, from a CPA's perspective.
In Ontario, the capital gains inclusion rate for individuals is 50%, so half of the gain is added to income and taxed at your marginal rate. On a $400K gain, $200K is taxable, roughly $86K at a 43% marginal rate. A principal residence is generally fully exempt; properties sold within 12 months may be taxed 100% as business income.
Michael John Lau, a CPA/CMA, explains how capital gains apply to Ontario property sales in 2026. This is general information, not advice, so always confirm with your own accountant.
How Capital Gains Work in Ontario
When you sell a property that is not your principal residence, the increase in value over your cost base is a capital gain. As of 2026, the inclusion rate is 50% for individuals, so one-half of the gain is added to your income for the year of sale and taxed at your marginal rate. On a $400,000 gain, $200,000 is taxable, which at a 43% marginal rate is roughly $86,000 in tax.
The anti-flipping rule matters: if you owned the property for at least 12 months, the 50% capital gains treatment applies. If you sell within 12 months of purchase, absent a qualifying life-event exemption, the full 100% of the gain is taxable as business income at your full marginal rate.
The Principal Residence Exemption
If the property was your principal residence throughout your ownership, the gain is generally fully sheltered by the Principal Residence Exemption, designated on your tax return. If it was a rental, second home, or only partly your principal residence, the exemption may be limited and a capital gain may apply to the non-qualifying portion or period.
Neeraj Moolchandani on confirming your tax position early
The tax treatment of a sale can shift the net result by a large amount, so it is worth confirming with an accountant before you list, not after you close.
We coordinate the real estate timeline with your accountant so the tax planning is in place ahead of the sale and there are no surprises at year end.
The Adjusted Cost Base
Your capital gain is the sale proceeds minus the Adjusted Cost Base (ACB). The ACB includes the original purchase price, legal fees at acquisition, and capital improvements made during ownership. Accurate ACB calculation reduces your taxable gain, so keep records of capital improvements. If you claimed Capital Cost Allowance on a rental property, the sale also triggers CCA recapture, which is 100% taxable as income. A qualified CPA should calculate your ACB and recapture before closing.
Frequently Asked Questions
What is the capital gains inclusion rate in Ontario in 2026?
For individuals, the inclusion rate is 50%, meaning half of the capital gain is added to your income and taxed at your marginal rate.
Is my principal residence exempt from capital gains in Ontario?
Generally yes, if it was your principal residence throughout your ownership, the gain is fully sheltered by the Principal Residence Exemption. If it was partly a rental or second home, the exemption may be limited.
What is the anti-flipping rule in Canada?
If you sell a residential property within 12 months of buying it, absent a qualifying life-event exemption, the full gain is taxed as business income at 100%, not at the 50% capital gains rate.
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