Capital Gains: The Increase That Never Happened
This is the one most agents still have wrong, because the story has three chapters and most people only heard the first one.
What was proposed: the 2024 federal budget called for raising the capital gains inclusion rate from one-half to two-thirds on gains above $250,000 for individuals, and on all gains for corporations and most trusts, effective June 25, 2024.
What happened next: the government deferred the start date to January 1, 2026. Then, on March 21, 2025, it cancelled the increase outright. The inclusion rate has stayed at 50% the entire time. If a client sold an investment property in 2024 or 2025 expecting a bigger tax bill because of this, they didn’t get one, and it’s worth telling them that directly since a lot of sellers still don’t know.
What did change: the Lifetime Capital Gains Exemption, which applies to qualified small business shares and farm or fishing property (not general real estate), rose to $1,250,000 and is now indexed to $1,275,000 for 2026. That part of the original proposal survived even though the inclusion rate increase didn’t.
Agent tip: don’t advise clients to rush a sale to beat a tax deadline that no longer exists. If a client mentions they’re selling before some capital gains cutoff, that’s worth a gentle correction before it shapes their decision.
Foreign Buyer Ban: Still in Effect Through 2027
The federal ban on residential purchases by non-Canadians runs until January 1, 2027, with exemptions for certain work permit holders, refugees, and buyers purchasing jointly with a Canadian spouse. If you’re working with international clients, our full breakdown of the foreign buyer ban and its exemptions covers who qualifies and how it interacts with provincial non-resident taxes.
Vacancy Taxes: The Federal One Is Gone, the Provincial and Municipal Ones Aren’t
This is the section that flipped hardest. The federal Underused Housing Tax, the 1% annual tax that mainly targeted foreign owners of vacant residential property, was eliminated through Bill C-15, which received Royal Assent on March 26, 2026. There’s no UHT return to file and no UHT to pay for the 2025 calendar year or any year after it. Returns for 2022 through 2024 still have to be settled if they weren’t already.
That federal repeal doesn’t touch what’s happening at the provincial and city level, and in some cases those rates went up in 2026 rather than down:
- BC Speculation and Vacancy Tax: now 1% of assessed value for Canadian citizens and permanent residents in specified regions, doubled from 0.5%. Foreign owners and satellite families pay 3%, up from 2%. The related tax credit also doubled, to $4,000.
- Vancouver Empty Homes Tax: a separate 3% municipal tax that stacks on top of the provincial one for Vancouver properties.
- Toronto’s Vacant Home Tax: still in effect and unaffected by the federal repeal.
Agent tip: if you’re telling a client the vacancy tax landscape got simpler this year, be specific about which layer you mean. The federal piece disappeared. The provincial and municipal pieces didn’t, and a BC seller in particular is now dealing with a higher rate, not a lower one.
Principal Residence Exemption: Reporting Still Required
Homeowners can still sell their primary residence without paying tax on the gain, but every sale still has to be reported on the tax return for the year it happens, even when the full exemption applies. This reporting requirement isn’t new for 2025 or 2026, it’s been standard practice for a number of years now, but it’s still one of the more commonly missed steps by sellers who assume that because no tax is owed, nothing needs to be filed.
Agent tip: remind sellers early in the listing process that they’ll need to report the sale, including the purchase date and sale price, even on a fully exempt principal residence. Waiting until tax season to find this out creates unnecessary stress for a client who already assumed the transaction was closed and done.
Putting It Together for Clients
Two of the three headline changes agents were bracing clients for in 2024 and 2025 simply didn’t happen the way they were announced. The capital gains increase is cancelled. The federal vacancy tax is gone. The foreign buyer ban is the one piece that held steady, and even that has a review underway that could reshape it after January 2027.
None of this happens in isolation from the broader market. Tax rules shift the math on individual transactions, but the bigger question for most clients is still where prices and demand are headed over the next few years. Our 5 year real estate forecast for Canada covers that side of the picture, interest rates, supply, and city-level pricing trends, so you can walk a client through both the tax situation and the market outlook in the same conversation.
If you’re working with international clients specifically, our breakdown of the foreign buyer ban goes deeper into who qualifies for the current exemptions.
