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Who qualifies for the Lifetime Capital Gains Exemption (LCGE)

Learn who can claim the Lifetime Capital Gains Exemption, what types of property qualify, and how much tax-free capital gain you can shelter

The Lifetime Capital Gains Exemption (LCGE) allows eligible individuals to realize certain capital gains tax-free, up to a government-set lifetime limit. This exemption can apply when selling qualified small business corporation (QSBC) shares or qualified farm and fishing property—two asset classes with special tax treatment under Canada’s Income Tax Act.

This matters most when selling a business, transferring family farmland, or passing down property as part of an estate. The LCGE can eliminate tax on hundreds of thousands of dollars of capital gains—but only if you qualify and stay within your lifetime limit.

What Is the Lifetime Capital Gains Exemption?

The LCGE allows individuals to exclude part or all of their capital gain on certain qualifying property from their taxable income. It’s not a deferral—the exempt gain is permanently removed from your income and never taxed.

As of 2024, the indexed exemption limits are:

  • $1,016,836 for qualified small business corporation shares

  • $1,000,000 for qualified farm or qualified fishing property

If you’ve claimed part of the exemption in previous years, your remaining limit is reduced accordingly. The CRA tracks this over your lifetime using Form T657.

Who Qualifies for the LCGE?

To claim the LCGE, you must meet three main conditions:

  1. You must be an individual resident of Canada
    Only individuals—not corporations or trusts—can claim the exemption. You must be a Canadian resident at the time of the disposition.

  2. You must dispose of eligible property
    This includes:

    • Qualified Small Business Corporation (QSBC) shares: Shares in a Canadian-controlled private corporation (CCPC) with more than 90% of assets used in an active business in Canada

    • Qualified Farm Property: Real property or shares of a family farm corporation used principally in farming

    • Qualified Fishing Property: Vessels, equipment, or shares of a family fishing business

  3. You must meet the holding period and use tests

    • You (or a related person) must have owned the property for at least 24 months

    • The corporation must meet asset-use tests during the holding period

    • The property must have been used primarily in a qualifying business

LCGE Limits by Property Type (2024)

Type of Property Lifetime Exemption Limit Indexing Applies? Notes
Qualified Small Business Corporation Shares $1,016,836 Yes Limit increases each year based on inflation
Qualified Farm Property $1,000,000 No Flat limit; not currently indexed
Qualified Fishing Property $1,000,000 No Combined with farm property limit
Combined Farm and Fishing (if both apply) $1,000,000 total No Limit is shared across both property types
 

Important: farming and fishing property share a combined exemption. You cannot claim $1,000,000 for each separately.

Important Considerations for Claiming the LCGE

Before claiming the exemption, make sure to:

  • Confirm the property qualifies using CRA definitions and asset-use tests

  • Calculate your cumulative net investment loss (CNIL) balance. If it is positive, it may reduce or eliminate your ability to use the exemption

  • Check past LCGE claims to determine your remaining lifetime limit

  • File Form T657 with your return for any year you claim the exemption

Also note that claiming the LCGE reduces your cumulative gains deduction limit, which can affect future claims. Proper planning is essential.