Capital Gains Tax in Canada: What You Owe and When
You are taxed on an investment gain only when you sell, and only on half of it. What counts as a sale, how your cost base works, and when the bill lands.
You opened a brokerage account a year or two ago, you bought a few things, and now it's tax season and you don't know what the government expects from you. Maybe you sold something in the spring and your money's long gone. Maybe you haven't sold anything and you're uneasy anyway.
In Canada you're taxed on an investment gain only when you sell, and only on a proportion of that gain. You won't be taxed on an investment that has gone up in value while you still hold it, no matter how much it's increased. If you've been watching your balance grow and wondering whether you were supposed to have done something about it, you weren't. One investor spent years assuming that money made inside an investment account was simply money made, and that nothing was owed until it came out.
Key takeaways
- Growth on paper costs you nothing. The tax arrives the day you sell, and not before.
- Half of a capital gain is added to your income. The other half is never taxed.
- Nothing inside a TFSA, RRSP, FHSA or RESP produces a capital gain, and nothing inside them produces a usable loss either.
- Your broker reports what the sale brought in. Working out what it cost you is your job, and the book value on the statement can be wrong.
- Nothing is withheld, so the bill lands the following April on money you may have already spent.
Do you owe tax if you haven't sold anything?
No. A gain that exists only on your screen is an unrealised gain, and unrealised gains aren't taxed. Your account can double and you'll owe nothing on the growth for as long as you leave it alone. Taxes apply as soon as you sell, when your gain becomes realised and the profit turns into money you can actually spend.
What your investments pay you while you hold them is a separate question. Dividends, interest and fund distributions are taxable in the year you receive them, even if you never sell a single share. [LINK: how dividends and interest are taxed in Canada]
Several transactions count as a sale even when they don't seem like they should be. Switching from one mutual fund into another counts as a sale and a purchase. So does trading one cryptocurrency for another. Giving an investment to a family member counts too, at its market value that day. So does moving investments from a non-registered account into a registered one such as a TFSA or an RRSP, and that transfer is worse than it looks, because the gain is taxable the day it moves and a loss on the same transfer can't be claimed at all.3
If everything you hold is in a TFSA or an RRSP
Then none of this applies to you, and you can stop reading here.
Your TFSA, RRSP, FHSA and RESP are all registered accounts, and the CRA doesn't examine what happens inside them. You can buy and sell your positions and never report a gain, because capital gains simply don't occur inside a registered account. In a TFSA your growth is entirely yours and withdrawals are also tax free. An RRSP is different on the way out, because you pay tax on withdrawals regardless of how the money was earned. Every dollar you withdraw counts as ordinary income at your full rate, whether it was a gain, a dividend or your own contribution.
The same wall blocks losses. If an investment loses money inside a registered account and you sell it, that loss does nothing for you at tax time. In a non-registered account the same sale gives you a capital loss, and a capital loss is worth something.
Everything below concerns a plain brokerage account, sometimes called a non-registered or cash account.
How much of a gain actually gets taxed?
Two numbers determine what you owe. The first is your gain, which is what you sold for minus what you paid. The second is the proportion of that gain the CRA counts as income, called the inclusion rate.
Say you bought shares for $10,000 and sold them years later for $18,000. Your gain is $8,000. Half of a capital gain is included in your income and the other half is never taxed at all, so $4,000 lands on your return and the rest is simply yours to keep.1
That included half appears on your tax return and is added to any other income you have, including employment income and any interest or dividends you earned that year. It's taxed at your marginal rate, which is the rate on your next dollar of income rather than an average across your whole income. Because only half the gain is counted, the effective rate on a gain always works out to half the rate on a paycheque. In Alberta, someone in the wide middle bracket pays 30.50% on their next dollar of salary and 15.25% on a capital gain.2 On that gain, the tax comes to $1,220.
| Category | Salary or interest | Capital gains |
|---|---|---|
| $16k | 14% | 7% |
| $23k | 22% | 11% |
| $59k | 28.5% | 14.25% |
| $61k | 30.5% | 15.25% |
| $117k | 36% | 18% |
| $154k | 38% | 19% |
| $181k | 41.29% | 20.65% |
| $258k | 47% | 23.5% |
| $370k | 48% | 24% |
A large gain can push part of your income into the next bracket. Only the amount above the bracket line is taxed at the higher rate, and income you'd already earned isn't re-taxed.
What is an adjusted cost base (ACB)?
Your adjusted cost base is what you actually paid for an investment, totalled up and continuously updated. It isn't the price displayed in your brokerage app, and it usually isn't the price you remember paying.
When you buy the same investment more than once at different prices, the cost you're taxed against changes every time. If you've bought a fund every month for years, you paid a different price each time, and Canada doesn't let you choose which units you're selling. You add up everything you've spent on that fund and divide by the units you hold. That average becomes the cost of every unit you own.
| Category | Market price | Your average cost |
|---|---|---|
| Month 1 | $20 | $20 |
| Month 6 | $23.5 | $21.4 |
| Month 12 | $21 | $21.7 |
| Month 18 | $27 | $22.8 |
| Month 24 | $26 | $23.5 |
| Month 30 | $32 | $24.7 |
| Month 36 | $35 | $25.9 |
Several things change that number. Commissions you paid when you made purchases get included, which reduces your gain. Dividends you had automatically reinvested bought more units at whatever the price was that day, and each of those purchases increases your total cost. A return of capital distribution, which is capital a fund returns to you rather than income, reduces your cost base instead and enlarges the gain you'll report when you do sell.4
Your cost base follows the security, not the account. If you hold the same ETF at two brokers, the CRA treats it as a single pool, and neither institution knows about the other.
[LINK: what an adjusted cost base is and how it's calculated] [LINK: ACB tracking spreadsheet]
If you have no idea what you paid for it
This happens constantly and it isn't a disaster. You inherit shares, or your employer's plan gets wound up. Institutions merge and lose the history, and a transfer between brokers often arrives with your units intact and your cost blank.
Begin with whatever documentation you do have. Old statements and trade confirmations are your best evidence, and your broker can retrieve records further back than its website shows, though you'll have to phone them. The company's transfer agent keeps its own record of who owned what and when. If your shares came through an estate, your cost is generally their market value on the day that person passed away, not what they originally paid for them.6 Settling an estate often takes months and the shares can reach you long after that, but the date that fixes your cost doesn't move. A surviving spouse is treated differently, because the investments roll over at the original cost instead and nothing is owed until the spouse sells.
When nothing turns up, you're allowed to make a reasonable estimate and keep a written note of how you arrived at it. You can look up historical prices for anything listed on an exchange, so a purchase date and that day's closing price is a defensible starting point. What the CRA rejects is a number with nothing behind it, not an honest reconstruction.
One investor sold a position years into their investing life still believing the gain would be worked out from the book value their broker displayed, which was the number they had been measuring themselves against the whole time. It took a financial planning course to find out otherwise. Pulling the historical detail together took a while, and a spreadsheet held it at first before an app took the job over. The tool matters less than the habit, because nobody wants to be reconstructing a decade of purchases in April.
Your broker reports the sale but not what you paid
When you sell in a non-registered account, your broker files a slip called a T5008 and sends a copy to the CRA. It reports what your sale generated. The cost box is frequently empty. When a number does appear, it's the broker's own book value, and that figure becomes unreliable in exactly the situations that matter, like a transfer in from another institution or years of reinvested dividends.
When there's no number, the CRA only has half the equation. They know what your sale generated and they don't know what it cost you. If you file without supplying that cost, or your tax software imports the slip and drops a zero into the box, the entire proceeds look like profit and you pay tax on money you never made.
A missing slip isn't permission to leave a sale off your return. Selling crypto on an exchange, selling shares in a private company and selling property all create a reportable gain, whether or not anything arrives in your mailbox.
What happens when you sell for less than you paid?
You have a capital loss. It offsets capital gains, and it can't be applied against your salary or your other ordinary income. The inclusion rule runs in reverse, so only the included share of your loss counts, matching the included share of a gain.
If you have no gains this year, your loss doesn't evaporate. You can carry it back against gains you reported in the past three years, which generates a refund, and you can carry it forward indefinitely until a gain appears to absorb it.5
Selling at a loss and buying the same thing straight back doesn't work. Repurchase within 30 days either side of the sale and the loss is disallowed, then added to the cost of the shares you bought back, so you get it eventually rather than this year.4 That window counts purchases made by your spouse and purchases inside your own registered accounts, so selling in a cash account and buying back in a TFSA lands in the same place.
When do you actually have to pay the tax?
You report your sale on the return for the calendar year it happened in, and both the return and the payment are due on April 30 of the following year.7
Nothing's withheld during the year. Your employer takes tax off every paycheque before you see it, but a brokerage sends you the entire proceeds and leaves the tax to you. Sell in January and your bill arrives more than a year later, by which point the money's usually been used. Some people move a portion of their proceeds into a separate account the day the trade settles.
If you owe more than $3,000 in a year, and owed more than that in one of the two years before it, the CRA can require you to pay by instalments through the year instead of a single payment.8 The threshold is $1,800 in Quebec. Interest accumulates on anything you pay late.
Does selling a cottage work the same way as selling your home?
The home you live in has an exemption behind it. When you sell your principal residence your gain can be sheltered entirely, so you'll usually owe nothing on a house you've owned for decades. You still have to report the sale and designate the property on your return, and if you skip that step the CRA can refuse the exemption outright, or accept a late designation with a penalty attached.9
A cottage doesn't get that automatically. Only one property in your family can be a principal residence for any given year, and if your house carries the designation, your cottage is an ordinary capital property. Your gain is the sale price minus your adjusted cost base, the same way it works when you sell shares.
A cottage's cost base includes more than the purchase price. Your land transfer tax and legal fees count. So do improvements that genuinely upgraded the property, like a new septic system or an addition. Repairs that merely maintained it won't count, and neither will the mortgage interest and property taxes you paid over the years.
| Category | Market value | Adjusted cost base |
|---|---|---|
| 1985 | $45,000 | $48,000 |
| 1995 | $90,000 | $55,000 |
| 2005 | $210,000 | $62,000 |
| 2015 | $400,000 | $78,000 |
| 2025 | $650,000 | $84,000 |
A cottage your family bought two generations ago, held through decades of a rising market and improved with receipts nobody kept, produces a large gain with almost nothing to offset it.
Common questions
Do I pay capital gains tax if I haven't sold anything?
No. Growth on an investment you still hold is an unrealised gain and isn't taxed. The tax applies the year you sell. Dividends and interest are different and are taxed in the year you receive them.
How much of a capital gain is taxable in Canada?
Half. Fifty per cent of the gain is added to your income and taxed at your marginal rate, and the other half is not taxed at all. The proposed two-thirds inclusion rate was cancelled and never came into force.
Do I pay capital gains tax inside a TFSA or an RRSP?
No. Capital gains don't arise inside a registered account, so there is nothing to report. A TFSA withdrawal is tax free. An RRSP withdrawal is taxed as ordinary income at your full rate, whatever the money was originally earned as.
What if I don't know what I paid for a stock?
You still have to work it out, because the tax is on the gain above your adjusted cost base. Old statements, the transferring broker and the company's transfer agent are the usual places to rebuild it from. Where nothing survives, a documented and reasonable estimate is accepted; a number with nothing behind it is not.
Can a capital loss reduce the tax on my salary?
No. Capital losses only offset capital gains. If you have no gains this year, the loss can go back against gains from the past three years or forward indefinitely.
Do I pay capital gains tax when I sell my house?
Usually not, if it was your principal residence for every year you owned it. You still have to report the sale and designate the property on your return, or the CRA can refuse the exemption. A cottage or second property gets no automatic exemption, because only one property per family qualifies for any given year.
Does transferring shares into my TFSA trigger tax?
Yes. Moving an investment from a non-registered account into a TFSA or RRSP counts as a sale at market value. A gain on that transfer is taxable, and a loss on it cannot be claimed at all.
Sources
- Department of Finance CanadaGovernment of Canada announces deferral in implementation of change to capital gains inclusion rate. The proposed two-thirds rate was later cancelled; the inclusion rate remains one-half. Accessed 2026-08-23.
- EYCombined federal and provincial personal income tax rates, Alberta 2026. Table dated 15 June 2026. Supports the 30.50% ordinary rate, the 15.25% capital gains rate and every point on the bracket chart. Accessed 2026-08-23.
- CRATransfers of property to your TFSA. Supports the in-kind transfer being a disposition at fair market value, with the gain taxable and the loss denied. Accessed 2026-08-23.
- CRAGuide T4037, Capital Gains. Supports the adjusted cost base, return of capital reducing it, and the 30-day superficial loss window on both sides of the sale. Accessed 2026-08-23.
- CRACapital losses and deductions. Supports the three-year carryback and the unlimited carryforward, against taxable capital gains only. Accessed 2026-08-23.
- CRATaxable capital gains on property, investments and belongings after someone passes away. Property is treated as sold immediately beforehand at fair market value, and that value becomes the beneficiary's cost. A surviving spouse or common-law partner gets a tax-deferred rollover instead. Accessed 2026-08-23.
- Government of CanadaGet ready to do your taxes. Supports the April 30 filing and payment deadline for individuals. Accessed 2026-08-23.
- CRAPaying your income tax by instalments. Supports the $3,000 threshold, the $1,800 Quebec threshold, and the requirement that it be exceeded this year and in one of the two prior years. Accessed 2026-08-23.
- CRAPrincipal residence and other real estate. Supports the requirement to report and designate the sale, and that a late designation may attract a penalty. Accessed 2026-08-23.
Educational, not financial advice. Figures verified against primary sources on the date shown.