The two-year capital gains saga generated enormous advisory activity: accelerated dispositions, corporate restructuring, conversations about inclusion rates, trust reviews, and estate plan overhauls. Much of that activity was justified at the time. The rules appeared to be changing. Advisors and their clients responded rationally to the information available.
Now the dust has settled. The inclusion rate did not change. The LCGE did. And the clients who acted during the uncertainty may be sitting on a position that made sense under a rule that never became law.
The Sequence That Created the Confusion
Budget 2024 proposed raising the capital gains inclusion rate from 50% to 66.67%, effective June 25, 2024. For individuals, the higher rate would apply only on gains above $250,000 annually. For corporations and most trusts, the higher rate would apply to all capital gains with no threshold. The CRA began administering the proposed rate in September 2024. Some corporations filed at 66.67%.
On January 31, 2025, the Department of Finance deferred the effective date to January 1, 2026. On March 21, 2025, Prime Minister Carney cancelled the proposed increase entirely. The CRA confirmed that all capital gains are subject to the 50% inclusion rate. Corporations that filed at the higher rate received corrective reassessments.
Three threshold-crossings in less than twelve months. The tax planning equivalent of a rule change at halftime, then a second rule change before full time, then a final announcement that the original rules stand. The advisors and accountants who tracked this carefully provided genuine value. The clients who were not receiving active guidance made planning decisions against a moving target.
What Survived the Saga: The LCGE at $1.25 Million
The one concrete positive change from the entire two-year period is the increase to the Lifetime Capital Gains Exemption. The LCGE now sits at $1.25 million, up from $1,016,836, effective retroactively to June 25, 2024. This applies to qualified small business corporation shares and qualified farm and fishing properties.
The practical impact: a business owner selling eligible CCPC shares can shelter up to $1.25 million of capital gains from tax entirely. At the 50% inclusion rate, that represents $625,000 of gains included in income that are exempted. For an Ontario resident in the top marginal bracket, that exemption is worth approximately $271,000 in federal and provincial tax avoided. The LCGE applies per individual, meaning a couple who both hold shares in a qualifying corporation can shelter up to $2.5 million combined.
Qualifying for the LCGE requires meeting the small business corporation test, the holding period test, and the asset composition test at the time of sale. These requirements are unchanged. What has changed is the ceiling. Clients approaching a business exit should have the LCGE eligibility question answered well before they initiate any sale process.
The TFSA in June: The Overlooked Window
The 2026 TFSA annual contribution limit is $7,000, the third consecutive year at that level. For a Canadian resident eligible since 2009, cumulative room is $109,000. The account is the only structure in Canada where capital gains, dividends, and interest all compound and withdraw completely tax-free, and where no future inclusion rate change can reach.
Mid-year is structurally the best time to surface the TFSA conversation with clients who have not yet contributed for 2026. January contributions attract attention because advisors send reminders. The clients who did not act in January have not lost the room: unused 2026 room carries forward indefinitely. The June conversation has a different texture. The client who has $7,000 sitting in cash, or sitting in a non-registered account earning taxable interest, can move it today. A client who withdrew from their TFSA during 2025 for any reason has that withdrawal amount restored as contribution room on January 1, 2026.
The RRSP contribution limit for 2026 is $33,810. The RRSP deadline for 2025-tax-year contributions was March 2, 2026, which has passed. Clients making 2026-tax-year contributions to their RRSP should be reminded that the deduction applies on their 2026 return, filed in spring 2027. Contributions made now reduce 2026 taxable income, which is the relevant planning horizon for clients with variable income this year.
The LCGE increased from $1,016,836 to $1.25 million in June 2024, the only concrete change to survive the two-year capital gains saga. At a 50% inclusion rate with Ontario's top marginal rate applied, the exemption shelters approximately $271,000 in tax for a single qualifying individual at the ceiling.
The Incorporated Client Review
The clients most in need of a mid-2026 tax conversation are incorporated business owners who took defensive action during 2024 or early 2025 in anticipation of the proposed inclusion rate increase. Common actions included accelerating the realization of corporate capital gains before the proposed effective dates, restructuring corporate investment portfolios away from growth assets, and converting held shares to other structures.
Each of these actions may have been correct at the time of the decision. Some may now produce unintended results. A corporate investment portfolio restructured away from growth assets in late 2024 may now be positioned suboptimally relative to current market conditions, including elevated energy prices that have benefited equity positions in Canadian oil and gas names. The tax justification for the restructuring no longer exists.
A clean review has a narrow scope: what changed in the corporate account or holding structure between June 2024 and March 2025 in response to the proposed inclusion rate, and whether those changes remain optimal given the current rules. This is a conversation that belongs in an advisor-accountant meeting, not a client email.