The capital gain inclusion rate is the portion of a capital gain that is included in income and subject to tax, set by section 38 of the Income Tax Act. The corresponding portion of a capital loss is the allowable capital loss, which can offset taxable capital gains.
The inclusion rate has been 50% for many years, meaning half of a capital gain is taxable. Budget proposals have at times signalled a higher inclusion rate for certain larger gains, so the rate applicable to a particular disposition should be confirmed for the relevant year before acting. The inclusion rate interacts with the lifetime capital gains exemption, capital loss carryovers, and the capital dividend account, all of which depend on the taxable and non-taxable portions of a gain.