In this highly informative episode of The Country Club Podcast, Diana Cassidy-Bush welcomes Chartered Professional Accountant Ben Bryden from Wilkinson & Company to break down one of the most misunderstood and most consequential topics in real estate: capital gains tax.

Ben walks listeners through the whirlwind of tax changes proposed since 2024, explaining what was supposed to happen, what actually happened, and what property owners should know as we approach 2026.

Whether you own a cottage, rental, farmland, or you’re thinking about selling in the next few years, this conversation gives you the clarity you need to plan confidently and avoid surprises.

Key Takeaways

1. The Capital Gains Inclusion Rate Remains at 50% as of this recording

Despite the upheaval from 2024–2025, the proposed increase to a ⅔ inclusion rate was cancelled in March 2025, leaving the long-standing 50% rate in place. This eliminates the urgency sellers once felt but future budgets may still bring change.

2. Timing Matters—Your Income Year Affects Your Tax Bill

Consider selling in a year where your income is lower to reduce the marginal tax rate applied to your gain. Selling early in a calendar year can defers tax payment to the following April.

3. The 12-Month Rule Automatically Applies

If you sell a property within 12 months of buying it, the profit is generally treated as business income (100% taxable) rather than a capital gain (50% taxable). Only specific life events may qualify for exemptions.

4. The Principal Residence Exemption (PRE)

For people with multiple properties (house + cottage), thoughtful planning is key. You must choose which property to designate for PRE based on accrued gain per year. If you use the PRE on a cottage sale, future gains on your primary home may become taxable.

5. Mixed-Use Properties Have Special Rules

If part of your home is used for rental or business purposes:

• You may need to apportion the sale value between personal and income-producing use.
• Using more than 50% of your home for business can jeopardize the PRE entirely.

6. Land Size Matters

The principal residence exemption typically covers the home + up to ½ hectare (1.24 acres) of land. Additional land may be taxed separately unless you can prove it’s necessary to the home’s use.

7. “Change of Use” Can Trigger a Taxable Event

If you convert a principal residence into a rental (or vice versa), the CRA treats it as a deemed disposition—a taxable capital gain—even if you don’t sell the property. You can avoid this by filing a special election with your tax return. Missing the election can result in penalties and unexpected taxes.

8. Keep Every Receipt for Capital Improvements

There is no 7-year rule for cost-base documentation.

• Improvements that increase value (steel roof, addition, upgraded countertops) raise your adjusted cost base and lower your eventual capital gain.
• Repairs that simply restore condition (new shingles, repainting) do not count as capital improvements.

9. Estate Transfers Can Trigger Capital Gains

When someone passes away:

• Property transferred to a spouse rolls over tax-free.
• Property transferred to children triggers capital gains at fair market value.
• Large real-estate-heavy estates may face liquidity issues without planning.

10. Special Rules Apply to Farm Properties

Farms actively used in a farming business may qualify for:

• The Lifetime Capital Gains Exemption (LCGE)—now up to $1.25M
• Or special rollover provisions for transferring farmland to...