Capital gains tax on stocks Canada
Capital gains tax on stocks Canada: sell shares for more than you paid and half the gain becomes taxable income at your marginal rate. The calculator below works out that half and the federal tax on it from your dates and your other income.
There is no stock rate and no reward for patience in the Canadian schedule. A gain on shares held three weeks and a gain on shares held thirty years run through the same inclusion rate and the same brackets.
The rule
Half the gain, at your marginal rate
The gain on a stock sale is the proceeds minus the cost base: what you paid plus the costs of buying, with the costs of selling taken off the proceeds. The inclusion rate is 50%, so half the gain lands on line 12700 of your return as ordinary taxable income. The other half, $20,000 on the example below, is tax free.
Because the taxable half is income, the rate you pay is your marginal rate: the bracket the gain lands in on top of everything else you earned. The 2026 federal brackets run 14% on the first $58,523 of income, 20.5% past it, up to 33% above $258,482. A larger salary, not a longer hold, is what pushes a stock gain into the higher brackets.
Canada has no holding-period discount. Some countries cut the tax for assets held past a threshold; Canada does not, so a disposal's dates matter for reporting order only. And shares of the same company pool into one average cost base, so a sale measures against the average of your buys rather than one lot's price.
The edges
Losses, foreign listings, the exemption
A stock loss offsets capital gains only. It never reduces your salary, and half of it is allowable, mirroring the inclusion on gains. Net capital losses you cannot use in the year carry back up to three years or forward without a time limit against taxable capital gains.
The gain is measured in Canadian dollars. A trade priced in a foreign currency needs its Canadian dollar value at the transaction before it counts, and that CAD figure is what the pool and the gain carry from there.
The lifetime capital gains exemption never shelters stocks traded on an exchange. Only qualified small business corporation shares and qualified farm or fishing property can draw on it, and using it takes an election on the return.
Worked example
A $40,000 stock gain draws $4,100 of federal tax
You buy bank shares for $30,000 on April 6, 2021 and sell them for $70,000 on September 15, 2026, with $85,000 of other income in 2026. The gain is $40,000: proceeds minus what the shares cost, five years of holding notwithstanding.
50% of it, $20,000, lands on line 12700. The whole taxable half sits inside the 20.5% federal bracket at that income, so the federal tax on the gain is $4,100. Your province taxes the same half a second time through its own brackets; the Ontario calculator page on this site works that layer out, and every other province replaces it with its own tables.
One stock sale in the 2026 return, federal layer only
| Step | Amount |
|---|---|
| Sale proceeds | $70,000 |
| Cost base (purchase price) | $30,000 |
| Capital gain | $40,000 |
| Taxable half at the 50% inclusion rate | $20,000 |
| Tax-free half | $20,000 |
| Federal tax on the gain at $85,000 income | $4,100 |
Questions
Frequently asked questions
How much tax do I pay when I sell stocks in Canada?
50% of the gain is taxable income, taxed at your marginal rate. On the worked example, a $40,000 gain for someone earning $85,000 draws $4,100 of federal tax, with the provincial layer on top of that.
Is there a holding period that lowers the tax?
No. Canada has no long-term rate, so the sale dates set the tax year and nothing else. Shares held a month and shares held a decade run through the same 50% inclusion.
How are foreign stocks taxed?
The same way, with every figure turned into Canadian dollars. A trade priced in a foreign currency needs its Canadian dollar value at the transaction before it counts, and the gain is computed on those Canadian dollar figures.
Can stock losses reduce the tax on my salary?
No. Capital losses offset capital gains only. Losses you cannot use carry back up to three years or forward without a time limit against taxable capital gains.
Do ETFs and mutual funds work the same way?
Yes. Units of the same fund pool into one average cost base like shares of one company, and 50% of the gain on a sale is taxable income at your marginal rate.
Does the lifetime capital gains exemption apply to stocks?
Not to shares traded on a stock exchange, ETFs or mutual funds. The exemption covers qualified small business corporation shares and qualified farm or fishing property only.
Sources
Where these figures come from
Also on capitalgainstax.net