Question 1

How do you calculate the capital gain on a house?

Accepted Answer

If your home is your principal residence, you won't have to pay tax on the capital gain realized on the sale. There is a capital gains exemption for principal residences in Canada. Otherwise, if the property is a rental building (plex), a secondary residence (e.g., cottage), land or stock market shares in a non-registered account, the capital gain will be taxed.

Question 2

What is the tax rate on capital gains?

Accepted Answer

When you sell a rental property (plex), vacation home, cottage, land or stock market shares (non-registered account), half of your capital gain will be added to your current year's taxable income. With the changes announced in 2024, two-thirds of the capital gain will be added to your taxable income for the portion of the gain in excess of $250,000. The tax rate depends on your total income and is identified as the marginal tax rate, i.e. the tax rate on the last dollars earned.

Question 3

How do I declare a capital gain?

Accepted Answer

If the sale price (cost of disposition) is higher than the purchase price (cost of acquisition), then this is a capital gain. Conversely, it's more a question of capital loss. The capital gain or loss must be reported on the tax return. For an individual capital gain, 50% of the gain between $0 and $250,000 is taxable, and 66.67% of the gain over $250,000 is taxable.

Question 4

What is the capital gains inclusion rate?

Accepted Answer

When you realize a capital gain, you don't pay tax on the entire amount. The capital gain inclusion rate is the portion of the gain that is taxed. Currently, only half (50%) of the capital gain is taxable. However, with the changes introduced in 2024, two-thirds (66.67%) of the capital gain will be taxable on the portion exceeding $250,000. The tax rate, on the other hand, is the rate at which the capital gain will be taxed.

Question 5

How can I save tax on a capital gain?

Accepted Answer

A capital gain is realized on the sale of an asset if the sale price (cost of disposal) is higher than the purchase price (cost of acquisition). The capital gain must be reported on the tax return and will be subject to tax. However, it is possible to save tax on a capital gain. For example, in the case of real estate, the capital gain will be exempt if it is a principal residence. For a financial investment, the capital gain will be exempt if the investment is made in a registered account such as a TFSA or RRSP. Note, however, that the RRSP will be taxed upon withdrawal.

Question 6

How can I avoid paying capital gains tax?

Accepted Answer

You don't have to pay capital gains tax in several situations. First, if the capital gain is realized on the sale of real estate, the capital gain is exempt if it is a principal residence. Then, if the capital gain is realized on the sale of a financial investment, the capital gain is exempt if the investment is made in a registered account such as a TFSA.

Question 7

What is the capital gains exemption on principal residence?

Accepted Answer

The capital gains exemption on principal residences is a tax measure designed to encourage home ownership and build family wealth. The capital gain on the sale of a principal residence is not taxed.

Vincent

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