Capital Gains Tax on Sale of Property

What is a Capital Gain?

When you sell a property for more than it originally cost you, the difference is considered a capital gain. In Canada, only 50% of capital gains are taxable.

Tax Implications

Capital gains are taxed at the same rate as your regular income tax rate. However, you may also be required to pay tax on recapture, which is the amount of depreciation you have claimed on the property.

When is Capital Gains Tax Payable?

Capital gains tax is payable when you sell the property. The tax is calculated based on the fair market value of the property on the date of sale.

Exceptions

There are some exceptions to the capital gains tax rules. These include:

• The sale of your principal residence
• The sale of property that is used for business purposes
• The sale of property that is inherited

How to Reduce Capital Gains Tax

There are several strategies you can use to reduce your capital gains tax liability. These include:

• Holding the property for a long period of time
• Investing in property that is expected to appreciate in value
• Using tax-deferred accounts, such as RRSPs

Conclusion

Capital gains tax is a significant consideration when selling property. By understanding the rules and using the available strategies, you can minimize your tax liability.