Capital Gains Tax in Ontario on a Home Sale: Niagara Guide

Written by Emily Barry

Updated November 2, 2026. Quick answer: You owe capital gains tax in Ontario when you sell real estate that wasn’t your principal residence for every year you owned it: a rental, cottage, vacant land, or an inherited home. The gain is the sale price minus your adjusted cost base (purchase price, land transfer tax, legal fees and improvements) and selling costs. Half the gain is taxable in 2026, taxed at your combined federal and Ontario rate, so the tax is roughly 13% to 27% of the gain. Ontario has no separate capital gains tax, but its surtax pushes the top rate on a gain to 26.76%. Sell within 365 days and the profit is usually fully taxed as business income instead.

Selling the home you live in? It’s usually tax-free. Read our principal residence exemption guide first. This guide covers what happens when the exemption doesn’t apply, or only covers part of the gain.

Capital gains tax in Ontario when you sell a Niagara home

Who owes capital gains tax in Ontario on real estate

You’re selling	What’s taxed
A rental, including student or short-term rentals	The capital gain, plus recapture of any depreciation (CCA) you claimed, which is fully taxable
A cottage or second home you didn’t designate	The gain for the years it wasn’t your principal residence
An inherited home or cottage	The parent’s gain up to the date of death goes on their final return. You’re taxed only on growth after that
Vacant land or a severed lot	The capital gain (business income if you subdivided to sell)
A duplex you live in and rent out half of	The gain on the rented unit. The unit you live in can be covered by the principal residence exemption
A home owned less than 365 days	Usually 100% taxable business income under the flipping rule
Property owned by a non-resident	Canadian tax on the gain, collected through the section 116 process

How to calculate capital gains tax in Ontario, step by step

The CRA formula is proceeds of disposition − adjusted cost base (ACB) − outlays and expenses = capital gain (CRA).

Proceeds: the sale price.
Adjusted cost base: the purchase price plus the costs of buying it, including Ontario land transfer tax, legal fees and title insurance, plus capital improvements (T4037).
Outlays and expenses: real estate commission (and the HST on it), legal fees and other selling costs.
Taxable capital gain: half the gain. You report it on Schedule 3 and add it to your income.

Improvement or repair? An addition, a finished basement or a new septic system usually adds to your ACB. Painting, fixing leaks and replacing worn-out items with the same kind are usually repairs. However, on a rental you deduct them against the rent instead. So keep every receipt.

Rentals: CCA recapture. If you claimed capital cost allowance (depreciation) on a rental building, that CCA usually comes back into income when you sell. It’s fully taxable, not half (CRA Guide T4036). You split the price between land and building, because you can’t depreciate land.

Vacant land: If the land earns some income, such as rent from a farmer, any interest and property tax you can’t deduct can be added to its cost base. If it earns nothing, the CRA says you can neither deduct them nor add them to the cost base (CRA Guide T4036).

Capital gains tax in Ontario in 2026: what a $100,000 gain costs

The inclusion rate is 50%. Ottawa cancelled the increase to two-thirds in March 2025 (Prime Minister of Canada). These 2026 rates apply to the taxable half (CRA):

Federal: 14% up to $58,523; 20.5% to $117,045; 26% to $181,440; 29% to $258,482; 33% above.
Ontario: 5.05% up to $53,891; 9.15% to $107,785; 11.16% to $150,000; 12.16% to $220,000; 13.16% above.
Ontario surtax: 20% of Ontario tax over $5,818, plus 36% of Ontario tax over $7,446 (CRA T4032ON). That turns Ontario’s 13.16% top rate into about 20.5%, which is why the top combined rate is 53.53%, or 26.76% of a capital gain.

Approximate 2026 tax on a $100,000 capital gain for an Ontario resident

Your other taxable income	Taxable half added	Approx. federal + Ontario tax on the gain	Share of the gain
$40,000	$50,000	$13,350	13.4%
$60,000	$50,000	$15,300	15.3%
$100,000	$50,000	$20,110	20.1%
$150,000	$50,000	$23,100	23.1%
$250,000	$50,000	$26,450	26.5%

Our calculation using 2026 federal and Ontario brackets, basic personal amounts, the Ontario surtax and the Ontario Health Premium. It ignores other credits and deductions, and AMT.

Alternative minimum tax (AMT): For AMT, 100% of a capital gain counts, at 20.5% federally, above a $181,440 exemption in 2026 (CRA T691; PwC). In addition, Ontario adds its own minimum tax. You can usually recover AMT you pay over the next seven years. Ask your accountant to run Form T691 before you close.

Niagara examples

These are hypothetical examples with round numbers, to show how the math works. Your own numbers will differ.

St. Catharines student rental near Brock

You bought a house near Brock University in 2016 for $330,000. Add $3,425 in Ontario land transfer tax, about $1,575 in legal fees and $20,000 to finish the basement into two more bedrooms: ACB $355,000. You claimed $30,000 of CCA over the years. You sell in 2026 for $518,000, close to St. Catharines’ September 2026 NAR benchmark of $517,700, with $25,000 in commission and legal fees.

Capital gain: $518,000 − $355,000 − $25,000 = $138,000. Half, $69,000, is taxable.
CCA recapture: $30,000, fully taxable (assuming the building’s share of the sale price is above its original cost).
Total added to income: $99,000. With $70,000 of other income, that’s about $37,800 in tax. Without the CCA claims, it would be about $24,500.

Inherited Lake Erie cottage in Wainfleet

Your parents bought a Wainfleet cottage in 1998. With purchase costs and a new septic system, their ACB was $120,000. Their Welland house was their principal residence, so no exemption covers the cottage gain. When your father died, the cottage rolled to your mother at cost, so no tax was due (CRA). Your mother dies in 2026 and the cottage is worth $466,000, the Port Colborne/Wainfleet benchmark.

Deemed gain on her final return: $466,000 − $120,000 = $346,000. The taxable half is $173,000, about $66,000 in tax if her other income was $40,000.
Ontario estate administration tax (probate): $15 per $1,000 over $50,000 = about $6,240 if the cottage were the whole estate (Ontario.ca). That’s separate from income tax.
Your cost base is $466,000. If you sell later, you pay tax only on growth after her death.

Niagara-on-the-Lake vacation home: joint ownership and the reserve

A couple bought a NOTL vacation home in 2014 for $520,000. With $6,875 of land transfer tax and $1,625 in legal fees, their ACB is $528,500. They sell in 2026 for $852,500, the NOTL benchmark, with $40,000 in selling costs. Gain: $284,000.

One spouse on title, earning $90,000: about $62,000 in tax.
Owned 50/50, each earning $90,000: about $56,200 combined. That’s about $5,800 less, but only if each spouse really paid their share. Under Canada’s attribution rules, the spouse who funded the property generally pays the tax on its gain (Income Tax Act s.74.2).
Vendor take-back mortgage: If the seller holds a mortgage for most of the price, they can claim a capital gains reserve and report the gain over up to five years, with at least 20% a year (CRA; Form T2017). For the single owner, five slices of $56,800 would cost about $47,200 instead of $62,000, if their income stays the same. The trade-off is that they wait for their money and carry the lending risk.

Capital gains tax in Ontario and Niagara: what’s different

Topic	What applies in Ontario and Niagara (as of November 2, 2026)
Provincial capital gains tax	None. The Ontario surtax and Health Premium raise the rate on the taxable half
Land transfer tax	Ontario LTT you paid when you bought is part of your ACB. Niagara has no municipal LTT like Toronto’s. If you got the first-time buyer refund, only count what you actually paid (Ontario.ca)
Non-Resident Speculation Tax	25%, charged when a foreign buyer buys, not on a sale (Ontario.ca).
HST on new or rebuilt homes	If you build or substantially renovate a home (generally 90% or more of the interior) to sell, you may be a builder and owe 13% HST on the sale (CRA)
HST on assignments	Since May 7, 2022, assigning an agreement on a new home or condo is always taxable. The part that pays back your deposit is excluded only if the assignment agreement says so in writing (CRA Notice 323; Excise Tax Act s.192.1)

Niagara Falls short-term rental investors

Niagara Falls allows whole-home vacation rentals only in tourist and commercial zones (see our principal residence exemption guide). Because a vacation rental isn’t your principal residence, the full gain is taxable, plus recapture of any CCA. If you registered for HST, ask whether HST applies to the sale.

US owner selling a Fort Erie cottage

A non-resident must notify the CRA (Form T2062) no later than 10 days after closing. Until the CRA issues a clearance certificate, the buyer’s lawyer can hold back 25% of the price, which is $125,000 on a $500,000 sale (CRA). Non-residents generally pay federal tax plus a 48% federal surtax instead of Ontario tax on the gain (CRA T4058; Income Tax Act s.120). The US taxes the gain too, but a foreign tax credit generally offsets it with the Canadian tax paid (IRS Publication 514). Buyers from outside Canada face separate rules (see our foreign buyer ban update). Talk to a cross-border accountant before you list.

Farms and vineyards in West Lincoln, Lincoln and Niagara-on-the-Lake

Qualified farm property can use the lifetime capital gains exemption, which is $1,275,000 per person for 2026 after indexing (CRA). The tests on who farmed the land, for how long and how much income it earned are strict, so a hobby farm or land rented to a neighbour may not qualify. The farmhouse and up to half a hectare can use the principal residence exemption. HST is a separate question: the CRA says sales of farmland by individuals are usually taxable, with limited exceptions (CRA GI-003). Ask your lawyer about HST before you list.

Severing a lot in Pelham or Lincoln

The gain on the severed lot is usually a capital gain, partly sheltered if the land was part of your principal residence. Splitting a parcel into two parts usually keeps the sale HST-exempt for an individual, but subdividing into more than two makes the sales taxable for HST and points toward business income (CRA GI-003). Talk to a lawyer before you apply to sever.

Selling a rental for less than you paid

Niagara’s benchmark price was $567,400 in September 2026, about 30% below the March 2022 peak (NAR). If you bought a rental in 2021 or 2022, you may be looking at a loss. A capital loss on the land can offset other capital gains, and a loss on the building is usually a terminal loss you deduct against income (CRA Guide T4037). You can’t claim a loss on the home you live in. If you’re deciding whether to sell or hold, read should I sell my house in Niagara right now.

The flipping rule

Selling any home, including a rental, or your purchase agreement on a new build (an assignment), within 365 days of buying it usually makes the profit fully taxable business income, unless a life event applies (CRA). See The Fine Print of Flipping a House.

Ways to lower capital gains tax in Ontario

Build your ACB. Find the purchase statement of adjustments (it shows the land transfer tax) and receipts for every improvement.
Pick the closing date. The gain falls in the calendar year you close. Closing in January instead of December pushes the tax a year out, maybe into a lower-income year such as retirement.
Use capital losses. Net capital losses can offset gains, carried back three years or forward indefinitely (CRA). A loss on a cottage or your home doesn’t count, because they’re personal-use property.
Make an RRSP contribution. A deduction can offset part of the taxable gain. The 2026 limit is $33,810, subject to your own room (CRA).
Think twice about claiming CCA on a rental you plan to sell soon, since it comes back as fully taxable income.
File a 45(2) election if you turn your home into a rental. It can keep the principal residence exemption going for up to four more years while it’s rented, as long as you don’t claim CCA. Our principal residence exemption guide has an example.
Check the principal residence exemption first. Designating a cottage for even a few years can save more than any other strategy here.

Local pages: St. Catharines, Niagara Falls, Niagara-on-the-Lake, Fort Erie, Port Colborne, Wainfleet, West Lincoln, Pelham, Lincoln. Prices: our Niagara market update. Buying costs: Ontario closing costs and land transfer tax.

Budget 2026 note: The federal budget comes out November 5, 2026 (Finance Canada). We’ll update this guide if it changes anything above.

Capital gains tax in Ontario: frequently asked questions

How the tax works

How much tax will I pay on a $100,000 capital gain in Ontario?

In 2026, half the gain ($50,000) is added to your income. Depending on your other income, the combined federal and Ontario tax is roughly $13,000 to $27,000. The maximum is 26.76% of the gain.

Can I add the land transfer tax I paid to my cost base?

Yes. Ontario land transfer tax, legal fees and other purchase costs are part of your adjusted cost base, which lowers your capital gain. If you got the first-time buyer refund, count only the tax you actually paid. Your purchase statement of adjustments shows the amount.

Can I spread a capital gain over several years?

Yes, if you don’t receive all the sale price up front, for example with a vendor take-back mortgage. You can claim a capital gains reserve on Form T2017 and report the gain over up to five years, with at least 20% each year.

Rentals, inherited homes and HST

Do I pay tax on the CCA I claimed when I sell my rental?

Usually, yes. If the building sells for more than its undepreciated capital cost, the depreciation you claimed is recaptured and fully taxed as regular income, not at 50%. You report it on Form T776 for the year you sell.

Who pays the capital gains tax on an inherited cottage in Ontario?

The person who died. The gain up to the date of death goes on their final return and is paid by the estate, unless the cottage passes to a surviving spouse. The heirs inherit it at its value on the date of death, so they’re taxed only on growth after that.

Do I pay HST when I sell a property in Ontario?

Usually not on a resale home. HST can apply if you built or substantially renovated a home to sell, if you assign an agreement on a new home, if you subdivide land into more than two lots, or if you sell farmland or commercial property. Ask a lawyer before you list.

Talk to us before you list

The Barry Team is led by Emily Barry, a REALTOR® in Niagara since 2003. Emily is #1 in Niagara Falls on Rate-My-Agent with a 4.99 rating, and the team ranked #5 among all eXp teams in Canada by sales volume in July 2026. We don’t give tax advice, but we can give your accountant a market value and help you time the closing. Book a seller’s meeting or get a home evaluation.

Disclaimer: This is general information as of November 2, 2026, not tax or legal advice. We simplified the examples. Talk to an accountant or tax lawyer before you sell, transfer or sever a property. The Barry Team and eXp Realty aren’t tax advisors.