Uncategorized 28 April 2024

Capital Gains tax

Capital Gains Calculations
The changes to Capital Gains have been in the news lately. So what is Capital Gains in Canada in relation to Real estate?
First of all, it is calculated very differently than in the USA so if you are Googling it be aware of that.
Secondly, it does not apply to the sale of your primary residence.
However, it will apply to the sale of a cottage. Many people have a family cottage that has belonged to family members for many decades so let’s use that as an example.
Cottage Purchased in 1990 for $15,000
The last family member to own it can no longer take care of it the rest of the family does not need it so it is to be sold.
Listed and sold for $415,000
Capital gain is $415,000-$15,000- $400,000 Gross Capital Gain
Now you may subtract Capital outlays for renovations and improvements. Say over the last 34 years the family has spent $100,000 on additions and renovations
$400,000-$100,000= $300,000
Realty commissions are also deductible and legal fees paid are also deductible. The Estate pays $20,000 for that
$300,000-$20,000 =$280,000 Net Capital Gain
The taxable portion of the Capital Gain is 50% as of now(April 2024)
$280,000 X 0.5= $140,000
This amount now gets added to the income of the Seller’s income tax filing.
The new calculation will stay at 50% for Taxable Capital Gain for Gains under $250,000 , in our example it is $280,000 and the incoming changes would mean that the taxable portion is 2/3 rather than 50%
$280,000 X 2/3= $186,666.67 added to income.
Talk to your accountant on how to protect yourself and loved ones.
Changes to Capital Gains