Capital Gains at 66%: Why Your TFSA Room Is Now Worth $3,333 Per $10,000
A salaried engineer in Calgary sold 400 shares of a U.S. tech stock in February 2026, a position she'd held since 2019. The gain came to $180,000. Under the old rules, she would have paid tax on half that amount. Under the rules that took effect in June 2024, she still pays tax on half. The inclusion rate didn't change for her because her total annual realized gains stayed under $250,000.
Her colleague sold 1,100 shares of the same stock. His gain was $490,000. He pays tax on half of the first $250,000, and on two-thirds of the remaining $240,000. That second portion, the $160,000, is now taxed at an effective rate roughly 35% higher than it would have been in 2023.
The mechanics of the 66.67% inclusion rate
The change is straightforward in structure. For individuals, realized capital gains up to $250,000 in a calendar year are included at 50%, the same rate that applied for decades. Everything above that threshold is included at 66.67%. The $250,000 limit does not carry forward. It resets every January 1st.
Corporations and most trusts face the 66.67% inclusion rate on the first dollar. There is no threshold for them. A CCPC that realizes $80,000 in passive investment gains now includes $53,360 of that as taxable income, not $40,000.
The Parliamentary Budget Officer projected this policy would generate $17.4 billion in additional federal revenue between 2024 and 2029. Most of that comes from individuals with lumpy liquidity events: selling a rental property, exercising a large option grant, liquidating a concentrated stock position built over years.
Why TFSA room became structurally more valuable
A $10,000 contribution to a TFSA in 2026 eliminates future tax on every dollar of growth inside that account. If that $10,000 grows to $30,000 over 15 years, the $20,000 gain is never taxed. In a non-registered account, that same $20,000 gain, assuming it pushes you over the $250,000 annual threshold, would be taxed at 66.67% inclusion. At a 50% marginal rate, you'd pay $6,667 in tax. The TFSA saved you $6,667. Divide that by the original $10,000 contribution and you get $666.70 per thousand, or $3,333 per $5,000.
The math scales. A full $7,000 contribution (the 2026 annual limit) that triples in value saves you $9,333 in tax on the gain if that gain would have otherwise landed above the threshold in a taxable account.
This is not theoretical. Salaried employees at companies that went public in the last five years, Shopify, Lightspeed, Nuvei, often hold RSU positions worth multiple years of salary. A single vest-and-sell event can easily generate a $300,000 gain. The portion above $250,000 now faces the higher inclusion rate. Had those shares been purchased inside a TFSA years earlier, none of it would be taxed.
The threshold management problem
The $250,000 limit creates a new planning constraint. Spreading a large sale across two calendar years can cut the tax bill substantially. A $480,000 gain realized entirely in 2026 results in $153,600 being included at the higher rate. The same gain split into $240,000 in December 2026 and $240,000 in January 2027 keeps both portions under the threshold. The tax difference is $20,480 at a 50% marginal rate.
This maneuver works only when the sale is discretionary. Employees whose RSUs vest on a fixed schedule, or who receive stock as part of a company exit, often cannot time the transaction. The gain hits in one year and the higher inclusion rate applies.
What this means for account prioritization in 2026
The TFSA and RRSP were always tax-advantaged. The inclusion rate change widened the gap between sheltered and non-registered growth. For someone in the top tax bracket who expects large future gains, every dollar of unused TFSA room now carries a higher opportunity cost.
The First Home Savings Account, introduced in 2023, layers on top of this. It allows $8,000 in annual contributions (up to a $40,000 lifetime cap) with the tax deduction of an RRSP and the tax-free withdrawal of a TFSA. For a salaried professional in their 30s saving for a down payment, the FHSA shelters what would otherwise be taxable investment growth during the high-earning years when capital gains are most likely to cross thresholds.
Loss harvesting now matters more. A realized capital loss in 2026 offsets gains at whatever inclusion rate those gains faced. If you trigger a $60,000 loss and apply it against gains above the $250,000 threshold, you're reducing income that would have been taxed at 66.67% inclusion, not 50%.
The federal government framed the policy as a fairness measure. For investors managing large, concentrated positions outside registered accounts, it functions as a cost increase on liquidity.
A salaried engineer in Calgary sold 400 shares of a U.S. tech stock in February 2026, a position she'd held since 2019. The gain came to $180,000. Under the old rules, she would have paid tax on half that amount. Under the rules that took effect in June 2024, she still pays tax on half. The inclusion rate didn't change for her because her total annual realized gains stayed under $250,000.
Her colleague sold 1,100 shares of the same stock. His gain was $490,000. He pays tax on half of the first $250,000, and on two-thirds of the remaining $240,000. That second portion, the $160,000, is now taxed at an effective rate roughly 35% higher than it would have been in 2023.
The mechanics of the 66.67% inclusion rate
The change is straightforward in structure. For individuals, realized capital gains up to $250,000 in a calendar year are included at 50%, the same rate that applied for decades. Everything above that threshold is included at 66.67%. The $250,000 limit does not carry forward. It resets every January 1st.
Corporations and most trusts face the 66.67% inclusion rate on the first dollar. There is no threshold for them. A CCPC that realizes $80,000 in passive investment gains now includes $53,360 of that as taxable income, not $40,000.
The Parliamentary Budget Officer projected this policy would generate $17.4 billion in additional federal revenue between 2024 and 2029. Most of that comes from individuals with lumpy liquidity events: selling a rental property, exercising a large option grant, liquidating a concentrated stock position built over years.
Why TFSA room became structurally more valuable
A $10,000 contribution to a TFSA in 2026 eliminates future tax on every dollar of growth inside that account. If that $10,000 grows to $30,000 over 15 years, the $20,000 gain is never taxed. In a non-registered account, that same $20,000 gain, assuming it pushes you over the $250,000 annual threshold, would be taxed at 66.67% inclusion. At a 50% marginal rate, you'd pay $6,667 in tax. The TFSA saved you $6,667. Divide that by the original $10,000 contribution and you get $666.70 per thousand, or $3,333 per $5,000.
The math scales. A full $7,000 contribution (the 2026 annual limit) that triples in value saves you $9,333 in tax on the gain if that gain would have otherwise landed above the threshold in a taxable account.
This is not theoretical. Salaried employees at companies that went public in the last five years, Shopify, Lightspeed, Nuvei, often hold RSU positions worth multiple years of salary. A single vest-and-sell event can easily generate a $300,000 gain. The portion above $250,000 now faces the higher inclusion rate. Had those shares been purchased inside a TFSA years earlier, none of it would be taxed.
The threshold management problem
The $250,000 limit creates a new planning constraint. Spreading a large sale across two calendar years can cut the tax bill substantially. A $480,000 gain realized entirely in 2026 results in $153,600 being included at the higher rate. The same gain split into $240,000 in December 2026 and $240,000 in January 2027 keeps both portions under the threshold. The tax difference is $20,480 at a 50% marginal rate.
This maneuver works only when the sale is discretionary. Employees whose RSUs vest on a fixed schedule, or who receive stock as part of a company exit, often cannot time the transaction. The gain hits in one year and the higher inclusion rate applies.
What this means for account prioritization in 2026
The TFSA and RRSP were always tax-advantaged. The inclusion rate change widened the gap between sheltered and non-registered growth. For someone in the top tax bracket who expects large future gains, every dollar of unused TFSA room now carries a higher opportunity cost.
The First Home Savings Account, introduced in 2023, layers on top of this. It allows $8,000 in annual contributions (up to a $40,000 lifetime cap) with the tax deduction of an RRSP and the tax-free withdrawal of a TFSA. For a salaried professional in their 30s saving for a down payment, the FHSA shelters what would otherwise be taxable investment growth during the high-earning years when capital gains are most likely to cross thresholds.
Loss harvesting now matters more. A realized capital loss in 2026 offsets gains at whatever inclusion rate those gains faced. If you trigger a $60,000 loss and apply it against gains above the $250,000 threshold, you're reducing income that would have been taxed at 66.67% inclusion, not 50%.
The federal government framed the policy as a fairness measure. For investors managing large, concentrated positions outside registered accounts, it functions as a cost increase on liquidity.
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