Budget 2026: the $15 million capital gains exemption, who qualifies and who does not
Budget 2026 (tabled November 5, 2026) sets out a capital gains exemption of up to $15 million. It is called the Canada Growth Incentive capital gains exemption. The headline can suggest it covers every owner. It does not.
This post sets out who qualifies and who does not, using the budget’s own tax annex. It describes the rules only. It does not tell you how to arrange anything.
Key takeaways
- The limit is $15 million, and it applies separately to each qualifying individual in respect of each business.
- Budget 2026 applies the exemption to qualifying shares issued on or after Budget Day and before 2037.
- A professional practice of an accountant, lawyer, notary, physician, other health care practitioner, engineer or architect is among the excluded groups.
- For at least 36 consecutive months immediately before the sale, the individual, or a partnership they belong to, must have held the share.
- The annex does not name dentists, and we read a dental practice as covered by “other health care practitioner”.
What the exemption does
Budget 2026 sets out a tax exemption for a Canadian-resident individual on capital gains from selling qualifying shares of a qualifying corporation. The limit is $15 million. That $15 million applies separately to each qualifying individual in respect of each business.
Three terms carry the whole measure: the qualifying individual, the qualifying share and the qualifying corporation. We take them in order.
The qualifying individual
Budget 2026 sets these tests for the person who claims:
- The person must be an individual other than a trust.
- The person must be at least 18 years old when they acquire the qualifying share.
- The person must be resident in Canada throughout the year in which they claim the exemption.
The claim can relate to a gain realized in that year or in an earlier taxation year.
The share must be issued to the individual, or to a partnership the individual belongs to. The individual or the partnership must own it directly. If a partnership acquires the share, the individual must be a member of the partnership, and at least 18 years old, at that time.
The qualifying share and the qualifying corporation
The annex sets conditions at three points in time: when the share is issued, while it is held, and when it is sold.
When the share is issued
- The corporation must be a Canadian-controlled private corporation.
- All or substantially all of the fair market value of its assets must come from assets used principally in a qualifying business carried on primarily in Canada. Assets reasonably intended to be used within 36 months also count.
- Immediately before and after the issue, the combined carrying value of the assets of the corporation and all related corporations must not exceed $100 million.
- The share must be issued either solely for cash, or in exchange for employment services the individual provides to the corporation.
While the share is held
- Throughout the period of ownership, 50 per cent or more of the fair market value of the corporation’s assets must come from assets used, or reasonably intended to be used, principally in a qualifying business.
- For at least 24 consecutive months after the issue, the qualifying business must be carried on primarily in Canada.
- For at least 36 consecutive months immediately before the sale, the individual, or a partnership they belong to, must have held the share.
When the share is sold
- The corporation must be a Canadian-resident corporation. It must be either a private corporation or a public corporation listed on a designated stock exchange in Canada.
- All or substantially all of the fair market value of its assets must come from assets used principally in a qualifying business.
Only shares issued on or after Budget Day qualify
Budget 2026 applies the exemption to qualifying shares issued on or after Budget Day and before 2037. The annex defines Budget Day as the day the budget is presented.
Shares issued before Budget Day fall outside that window. If your corporation issued your shares before Budget Day, the annex does not extend the $15 million to them.
The qualifying business, and who is left out
A qualifying business is an active business, except the following three groups.
- A business providing consulting services. A professional practice of an accountant, lawyer, notary, physician, other health care practitioner, engineer or architect. Any business whose principal asset is the reputation or skill of one or more employees.
- A business operating in the agricultural, fishing, forestry, mining, financial, insurance, utilities, real estate, food and accommodation, arts, recreation or entertainment sectors.
- A business operating under a licensing or franchising agreement.
Several groups we work with meet this list directly. The list names the professional practices of physicians and other health care practitioners. It also names accountants, lawyers, notaries, engineers and architects. It names real estate as a sector.
The annex does not name dentists. A dental practice is a health care practice, so we read it as covered by “other health care practitioner”. That is our reading. The annex does not define the term. Contractors and truckers are not named in the list, so for them the question is whether the business is an active business that falls outside all three groups.
Two owners, the same gain
Here is a worked example. The facts are made up. Both people sell shares and realize a capital gain of $20,000,000.
Priya, a Chilliwack manufacturer
Suppose Priya founds a manufacturing corporation on or after Budget Day. She is over 18 and resident in Canada. The corporation is a Canadian-controlled private corporation. Her shares are issued to her for cash, and she holds them directly for more than 36 consecutive months. Manufacturing is not named in the excluded groups, so the business is an active business outside them. The corporation’s assets stay under $100 million. Suppose every other test in the lists above is also met.
On those facts, Priya’s exemption under Budget 2026 is $15,000,000 of her $20,000,000 gain. The $15 million limit caps it. The other $5,000,000 of gain stays outside the exemption.
Dr. Lee, an Abbotsford dentist
Dr. Lee owns shares in a corporation that holds a dental practice. Suppose the shares were issued on or after Budget Day, for cash, and held for the full 36 months. Suppose every other test is met too.
On our reading, the exemption still does not apply. A dental practice is a health care practice. A professional practice of a health care practitioner is not a qualifying business. The corporation then fails the qualifying business test, so the shares are not qualifying shares. On that reading, the exemption under Budget 2026 is $0, and the full $20,000,000 gain sits outside it.
| Item | Priya (manufacturer) | Dr. Lee (dentist) |
|---|---|---|
| Capital gain | $20,000,000 | $20,000,000 |
| Qualifying business | Yes, an active business outside the excluded groups | No, on our reading a health care practice is excluded |
| Exempt amount under Budget 2026 (on the facts above) | $15,000,000 | $0 |
| Gain outside this exemption | $5,000,000 | $20,000,000 |
In this example, the gap between the two owners has nothing to do with the size of the gain. It comes from the type of business.
How it fits with the lifetime capital gains exemption
The lifetime capital gains exemption is a separate, existing rule. Our lifetime capital gains exemption guide covers it. Budget 2026 links the two in these ways:
- A claim under the Canada Growth Incentive exemption limits the ability to claim the lifetime capital gains exemption on a sale of shares of the same corporation.
- A lifetime capital gains exemption claimed on the sale of shares of a corporation limits the ability to claim the Canada Growth Incentive exemption on shares of that same corporation.
- A qualifying individual can generally claim both the capital gains exemption on a sale to an Employee Ownership Trust or a worker cooperative and the Canada Growth Incentive exemption on the same sale. Using one has no effect on the limit under the other.
Our post on selling a dental practice and the lifetime capital gains exemption walks through the existing exemption for dental practices.
Other points in the annex
Gains exempted under Budget 2026 carry an inclusion rate of 30 per cent for the Alternative Minimum Tax. On Priya’s $15,000,000 exempt gain, that is $4,500,000 counted in the AMT calculation. The annex says this matches the treatment of gains eligible for the lifetime capital gains exemption.
The annex also says integrity rules are still to come. They target circumstances that do not align with the intent of the measure. One example is multiplying the limit through several corporations that carry on the same underlying business. The annex says details will be released at a later date. Until then, the full set of conditions is not known.
Budget 2026 also refers to continuity rules for certain share-for-share exchanges and other reorganizations after qualifying shares are issued. The annex gives no detail on them in this section.
Where this leaves you
Under Budget 2026, the shares must be issued on or after Budget Day. The business must be an active business outside the excluded groups. The holding periods must be met. Owners of businesses in the excluded groups do not qualify.
For the wider picture of what Budget 2026 sets out for small business owners, read our Budget 2026 summary.
Questions about Budget 2026 and your business? Talk to us or call 778-779-4212.
Source: Budget 2026, Tax Measures: Supplementary Information. Figures are from the Budget 2026 tax annex at budget.canada.ca.
General information only. Talk to us about your situation.