The Canada Revenue Agency (CRA) has announced several changes that will come into effect on January 1, 2026. At the top of the list is the long-anticipated increase to the capital gains inclusion rate, but there are also important updates to the Lifetime Capital Gains Exemption (LCGE) and Employment Insurance (EI) program. Whether you’re an individual investor, a business owner, or an employer, these adjustments could have a direct impact on your financial planning.
The Capital Gains Inclusion Rate
The capital gains inclusion rate determines how much of your profit from selling investments, property, or other assets is counted as taxable income. For decades, Canadians have been used to an inclusion rate of 50 percent. Starting in 2026, that will change.
For individuals, the first $250,000 in capital gains each year will remain taxed at the current 50 percent rate. However, any gains above that threshold will be subject to a two-thirds inclusion rate (66.67 percent). For corporations and most trusts, the new two-thirds rate will apply to all capital gains, without the $250,000 buffer.
This adjustment was initially scheduled to take effect in mid-2024, but the government postponed it to January 1, 2026, giving taxpayers and advisors more time to prepare. Still, for those anticipating large sales of property, investments, or business shares, the change could mean a higher tax bill unless planning is done ahead of time.
The Lifetime Capital Gains Exemption
Not all the news is about paying more tax. The Lifetime Capital Gains Exemption (LCGE), which applies to certain sales of small business shares, farms, and fishing properties, saw an increase in 2024 to $1.25 million. Starting in 2026, the exemption will once again be indexed to inflation, meaning the limit will gradually increase each year.
For entrepreneurs and family business owners, this is a valuable tool to help reduce taxes when it comes time to sell.
Employment Insurance Updates
Another change on the horizon affects employers and employees. Beginning in 2026, the maximum amount of insurable earnings under the Employment Insurance (EI) program will rise to $68,900, while the premium rate will be set at $1.63 per $100 of insurable earnings.
For employees, this means slightly higher EI deductions from paycheques. For employers, payroll costs will also increase, making it important to factor these adjustments into upcoming budgets.
Behind the Scenes at the CRA
Part of the reason for the delayed rollout of these changes was the CRA’s effort to modernize its internal systems. Throughout 2025, these updates caused some delays and even extensions for certain 2024 tax filings. By 2026, the expectation is that these systems will be ready to handle the new rules more smoothly.
Looking Ahead
The biggest takeaway is that the tax landscape will look different in 2026. The increase to the capital gains inclusion rate is the most significant shift, particularly for high-income earners, corporations, and trusts. At the same time, the return of LCGE indexation provides some welcome relief for entrepreneurs, while EI adjustments are a reminder for employers to revisit payroll plans.
If you’re considering selling investments, property, or a business in the near future, it may be worth reviewing your options before these changes come into effect. A proactive strategy could help you reduce your tax exposure and take advantage of existing rules while they last.
