Capital Gains Tax in Ontario
Ontario is Canada’s most populous province and home to the Toronto Stock Exchange, making capital gains tax a key concern for the province’s large investor base. When you sell an asset — such as stocks, ETFs, mutual funds, or investment real estate — for more than you paid, the profit is a capital gain. In Canada, only 50% of your capital gain (the inclusion rate) is added to your taxable income. That taxable portion is then taxed at your combined federal and Ontario marginal tax rate.
Because Ontario’s top provincial rate reaches 13.16% — and the Ontario surtax pushes the effective top rate even higher — the province has one of the highest combined marginal tax rates in the country at 53.53%. This means the maximum effective capital gains tax rate for Ontario residents is 26.77%.
Ontario 2026 Tax Brackets
Ontario Provincial Tax Brackets (2026)
| Tax Bracket | Rate |
|---|---|
| First $52,886 | 5.05% |
| $52,886 – $105,775 | 9.15% |
| $105,775 – $150,000 | 11.16% |
| $150,000 – $220,000 | 12.16% |
| Over $220,000 | 13.16% |
Ontario also applies a surtax on provincial tax exceeding certain thresholds: 20% of basic provincial tax over $5,315 and 36% of basic provincial tax over $6,802. This surtax effectively increases the marginal rate for higher-income taxpayers.
How Ontario Compares
Ontario’s top capital gains rate of 26.77% — inflated by the provincial surtax — places it among the highest in Canada. Here’s how Ontario stacks up against key comparison provinces:
| Province | Top Combined Rate | Top CG Rate |
|---|---|---|
| Ontario | 53.53% | 26.77% |
| Quebec | 58.75% | 29.38% |
| Alberta | 48.00% | 24.00% |
| British Columbia | 53.50% | 26.75% |
See the federal tax brackets for the complete 2026 federal bracket schedule.
Capital Gains Tax Rates in Ontario
Because only 50% of a capital gain is taxable, the effective capital gains tax rate is half the combined marginal rate. Here are the effective capital gains tax rates at various income levels for Ontario residents:
| Taxable Income Range | Combined Marginal Rate | Effective Capital Gains Rate |
|---|---|---|
| Up to $52,886 | 20.05% | 10.03% |
| $52,886 – $57,375 | 24.15% | 12.08% |
| $57,375 – $105,775 | 29.65% | 14.83% |
| $105,775 – $114,750 | 31.48% | 15.74% |
| $114,750 – $150,000 | 33.89% | 16.95% |
| $150,000 – $220,000 | 37.91% | 18.96% |
| Over $220,000 (top bracket) | 53.53% | 26.77% |
The jump to the top bracket is significant due to the Ontario surtax. Taxpayers approaching this threshold should consider strategies to manage the timing of capital gains.
Worked Example: Capital Gains Tax in Ontario
Scenario: You are a Toronto tech worker earning $150,000 in employment income. You sell a rental condo for a $120,000 capital gain.
Step 1: Calculate the taxable capital gain
| Amount | |
|---|---|
| Total capital gain | $120,000 |
| Inclusion rate | 50% |
| Taxable capital gain | $60,000 |
Step 2: Determine which brackets the gain falls into
Your employment income of $150,000 already fills the lower brackets. The $60,000 taxable gain pushes your total taxable income from $150,000 to $210,000 — staying within Ontario’s fourth bracket (12.16%) but crossing a federal bracket boundary.
| Income Range | Amount | Federal Rate | Ontario Rate |
|---|---|---|---|
| $150,000 – $177,882 | $27,882 | 26.00% | 12.16% |
| $177,882 – $210,000 | $32,118 | 29.00% | 12.16% |
Step 3: Calculate the tax
| Component | Calculation | Tax |
|---|---|---|
| Federal tax | $27,882 × 26% + $32,118 × 29% | $16,564 |
| Ontario base tax | $60,000 × 12.16% | $7,296 |
| Ontario surtax (incremental) | 20% over $5,315 + 36% over $6,802 on added base tax | $4,086 |
| Total tax on gain | $27,946 | |
| Effective rate on $120,000 gain | 23.29% |
At this income level, the Ontario surtax adds meaningfully to the provincial tax. The same gain realized in Alberta would produce roughly $14,575 in tax — about $13,000 less — illustrating how Ontario’s surtax compounds the cost of large gains.
How to Reduce Capital Gains Tax in Ontario
Avoid the Surtax With RRSP Contributions
Ontario’s surtax dramatically increases the effective tax rate on capital gains for higher earners. A well-timed RRSP contribution in the same year you realize a large gain can pull your taxable income back below surtax thresholds. Because the deduction value is amplified at Ontario’s higher rates, each dollar contributed saves more here than in most other provinces.
Split Gains Across Calendar Years
The Ontario surtax creates a steep jump in effective rates once your provincial tax exceeds $5,315 and again at $6,802. If you control the timing of a sale — such as investment real estate or a stock portfolio — selling a portion before December 31 and the rest after January 1 can keep each year’s income below surtax territory, potentially saving thousands.
Claim the Principal Residence Exemption on Toronto Real Estate
Toronto-area property values have created enormous embedded gains for long-time homeowners. The principal residence exemption shelters the entire profit from tax when you sell the home you ordinarily inhabit. If you own both a city home and an Ontario cottage, only one can be designated per year — plan your designations carefully over your ownership period and file Form T2091 on sale.
Donate Appreciated Securities for Combined Federal and Ontario Credits
Donating publicly traded stocks or ETFs directly to a registered charity eliminates the capital gains inclusion entirely. You also receive charitable donation credits at both the federal level and the Ontario level, and Ontario’s higher marginal rates make the provincial credit particularly generous for top-bracket taxpayers.
Ontario-Specific Tax Considerations
The Ontario Surtax
Ontario is one of the few provinces that levies a surtax on top of the basic provincial income tax. The surtax is calculated as 20% of basic provincial tax in excess of $5,315 plus 36% of basic provincial tax in excess of $6,802. This additional layer of tax is what pushes Ontario’s top combined marginal rate to 53.53% — one of the highest in Canada. For capital gains, this means Ontario’s top effective rate of 26.77% is notably higher than provinces like Alberta (24.00%) or Saskatchewan (23.75%).
Ontario Health Premium
The Ontario Health Premium is an additional levy based on taxable income, ranging from $0 (for income under $20,000) to $900 (for income over $200,000). While not technically a tax bracket, it adds to the overall tax burden for Ontario residents.
Real Estate Capital Gains in Ontario
Ontario’s real estate market, particularly in Toronto, has produced significant capital gains for property investors. Non-principal-residence properties such as rental units, cottages, and vacant land are subject to capital gains tax on sale. The province also levies a land transfer tax, and the City of Toronto adds a second municipal land transfer tax on purchases within city limits.
Ontario Trillium Benefit
Lower-income Ontario residents may qualify for the Ontario Trillium Benefit, which combines the Ontario Sales Tax Credit, Ontario Energy and Property Tax Credit, and Northern Ontario Energy Credit. A large capital gain in a single year could affect eligibility for these income-tested benefits.
Related Calculators
- Income Tax Calculator — Calculate your combined federal and Ontario tax
- Capital Gains Tax Calculator (All Provinces) — Compare capital gains tax across Canada
- TFSA Calculator — Plan tax-free investment growth
- RRSP Calculator — Estimate RRSP contribution room and tax deductions
- Investment Calculator — Project long-term portfolio growth
- Dividend Calculator — Calculate dividend income and tax credits
- Tax Brackets — View all federal and provincial tax brackets
Reduce Your Capital Gains Tax With Registered Accounts
Investments held in a TFSA or FHSA grow completely tax-free — no capital gains tax, ever. For Ontario residents facing some of Canada’s highest marginal rates, maximizing these accounts is one of the most effective tax strategies available. Open a commission-free investing account today and get a $25 bonus to start building your tax-sheltered portfolio.