If you are selling an investment property or secondary residence, understanding capital gains tax is essential. It determines how much of your profit you keep after the sale.
In Canada, when you sell a property that is not your principal residence, half of the profit (the “capital gain”) is taxable. For example, if you bought a condo for $600,000 and sold it for $800,000, your capital gain is $200,000. You would pay tax on 50 percent of that amount ($100,000), added to your annual income at your marginal tax rate.
Your principal residence — the home you primarily live in — is exempt from capital gains tax. However, you must report the sale on your tax return and designate it as your principal residence for the exemption to apply.
If you have rented out part of your home or owned multiple properties, the calculation becomes more complex. Keeping detailed records of purchase prices, improvements, and selling costs is crucial for accurate reporting.
Consulting a tax professional ensures you comply with CRA rules and take advantage of any deductions or exemptions available.
Unsure how capital gains may affect your sale?
I can connect you with a trusted accountant or tax advisor to help you plan ahead and understand your net proceeds.