Ontario property owners are being warned—often dramatically—that 2026 will bring sweeping new taxes capable of doubling or tripling household costs. While many of those claims circulating online are overstated, several confirmed policy changes are converging at the same time, and for some residents, the financial impact will be real.

The changes fall into three main areas:

Each affects different groups of property owners in different ways.

The most significant confirmed change comes from the federal government. As of January 1, 2026, Ottawa will implement a new structure for taxing capital gains.

Under the new rules, the first $250,000 in capital gains realized in a year by an individual will continue to be taxed at the current 50 per cent inclusion rate. Any capital gains above that threshold will be included in taxable income at a higher 66.7 per cent rate.

In practical terms, this means that a larger portion of profit from the sale of certain properties will be subject to income tax. The change applies to investment properties, rental housing, cottages, second homes, and property flips. It does not apply to the sale of a principal residence, provided the exemption is properly claimed and reported.

For Ontario residents who have held investment properties for many years—particularly in high-growth regions—the higher inclusion rate can result in substantially higher tax bills when a property is sold.

The change does not increase property taxes paid annually, but it increases the tax owed at the time of sale.

Despite widespread claims online, there is no new tax on selling a principal residence and no plan to eliminate the principal residence exemption. However, reporting and enforcement around the exemption have tightened.

Homeowners are required to report the sale of a principal residence to the Canada Revenue Agency, even when the entire gain is exempt from tax. Failure to file correctly can result in penalties or denial of the exemption.

In recent years, the CRA has focused more closely on situations where a property was partially rented, used for business purposes, or frequently bought and sold. In these cases, the exemption may be reduced or disallowed entirely. Properties that appear to be flipped—rather than used as a long-term home—may be taxed as business income rather than capital gains.

For many homeowners, the issue is not a change in law but a reduction in administrative forgiveness.

Ontario does not impose a province-wide vacant home tax. Instead, individual municipalities are adopting their own programs, often in response to housing shortages and revenue pressures.

Several major Ontario cities now levy annual taxes on residential properties deemed vacant. Toronto has increased its Vacant Home Tax rate to 3 per cent of a property’s assessed value. Ottawa and Hamilton have implemented similar programs, while other municipalities are actively considering them.

These taxes typically apply when a property is unoccupied for most of the year and are charged in addition to regular property taxes. Owners are usually required to file annual declarations, and penalties can apply if declarations are missed or inaccurate.

While these programs affect a smaller group of residents—primarily owners of vacant or lightly used urban properties—the financial impact can be significant, particularly in high-value markets.

For most Ontario homeowners, the most immediate pressure will continue to come from municipal property tax increases, rather than new federal rules.

Municipalities across Ontario are facing rising costs related to infrastructure, staffing, housing programs, and service delivery. At the same time, property assessments are reflecting higher market values after years of appreciation.

Because property tax bills are calculated using both assessed value and the municipal tax rate, increases on both sides can compound quickly. Even homeowners who have not bought, sold, rented, or altered their property may see noticeable increases in annual tax bills in 2026.

The combined effect of these changes is uneven.

By contrast, most owner-occupied principal residences are not affected by capital gains changes, though they remain subject to rising municipal taxes.

The policy landscape in 2026 reflects a broader shift: governments are placing greater emphasis on taxing non-primary housing use, discouraging vacancy, and capturing more revenue from high-value transactions, while municipalities continue to rely heavily on property taxes to fund operations.

For residents, the key issue is not panic but clarity. Understanding how a property is classified, how it is used, and how local bylaws apply has become increasingly important. For some households, the changes will have little effect. For others, particularly those holding additional properties, the financial consequences will be material.

Sources