The proposed increase to the capital gains inclusion rate, from 50% to two-thirds, is not merely on hold. Ottawa cancelled it outright on March 21, 2025, after first deferring the effective date to January 1, 2026 in a January 31, 2025 announcement. The result for 2026 is unambiguous: every taxpayer, corporation and trust continues to use the 50% inclusion rate on capital gains, the same rate that has applied since the stated rate was last set.
For advisors who spent 2024 and 2025 fielding client questions about a coming increase, the story now looks finished. It is not. Two changes that were bundled into the same policy period did proceed, and one of them is doing more quiet damage to high-gain clients than the cancelled rate increase ever would have.
What Actually Changed While the Rate Debate Dragged On
The Lifetime Capital Gains Exemption increase to $1,250,000, effective June 25, 2024, was never tied to the cancelled inclusion rate hike, and it proceeded on schedule. Indexed forward under the standard annual mechanism, the LCGE reached $1,275,000 for 2026. The exemption applies to qualifying dispositions of shares in a Canadian-controlled private corporation and to farming and fishing property, and it shelters the first tranche of a business owner client gain from tax entirely, separate from the inclusion rate question altogether.
The Lifetime Capital Gains Exemption has climbed faster since Budget 2024 than at any point in its history, and that increase, not the cancelled inclusion rate hike, is now the more consequential capital gains change for a business owner client planning an exit.
The exemption rose from $800,000 in 2014 to $1,275,000 for 2026, with the largest single jump following the Budget 2024 increase to $1.25 million rather than the usual incremental indexing. Source: TaxTips.ca.
The AMT Trap Most Advisors Have Not Modelled
The Alternative Minimum Tax runs a parallel calculation that most clients never see until it applies to them. For AMT purposes, 100% of a capital gain is included in the tax base, not the regular 50%. That figure is tested against a federal AMT rate of 20.5% and a basic exemption of $173,206, indexed annually and based on the start of the fourth federal tax bracket in the 2024 tax year.
The practical effect on a large, one-time realisation is severe. A client who would have paid roughly $22,000 in tax on a $2,000,000 capital gain under the prior AMT treatment now faces total tax closer to $252,000 once the current AMT rules are applied. That is not a rounding difference. It is a different planning problem entirely, and it applies whether or not the client has heard anything about the cancelled inclusion rate increase.
Trusts carry a specific version of this exposure. The AMT basic exemption is not available to a trust, with the narrow exception of a qualified disability trust, which means even a moderate gain realised inside a family trust can trigger AMT liability that an equivalent gain held personally would not. Graduated rate estates and qualifying employee ownership trusts are exempt, but a standard discretionary family trust holding appreciated securities is not.
The Planning Bridge for This Result
The conversation an advisor should be having now is not about whether the inclusion rate is going up. It is settled at 50%, and clients who have been bracing for an increase can be told that directly and accurately. The conversation that still needs to happen is with any client sitting on a large unrealised gain outside a registered account, a business owner planning a share sale that will use the higher LCGE, or a family with a trust holding appreciated securities, because each of those situations now runs through the 100% AMT inclusion rate before it runs through the settled 50% regular rate.