Capital Gain Tax on Investment Property

Canada’s capital gain tax was introduced in part to finance the growing costs of social security system and create a more equitable system of taxation, even senior’s need to pay capital gain tax and there is no exemption. Every single person who owned a property for more than three years, any gain arising from such sale will be considered as long term capital gain, current long term capital gain tax rate is 20% and it is calculated as the difference between net sales consideration and indexed cost of property. The chart below shows an example of long term calculation capital tax:

Sales price of house——————————————————————5,000,000

(Less)Transfer expenses (brokerage & commission) ————————25,000

Net sales——————————————————————————–4,975,000

(Less) acquisition cost of the house———————————————–4,141,304

(Less) house improvement cost —————————————————254,000

Gross long term capital gain——————————————————–579,696

Short term capital gain on property is considered as a gain from selling a property which was held by you for less than 2 years. Here is an example to show the calculation:

Sales price of house——————————————————————5,000,000

(Less)Transfer expenses (brokerage & commission) ————————25,000

Net sales——————————————————————————–4, 97 5,000

(less) purchase price of the house————————————————3,000,000

(less) house improvement———————————————————200,000

Gross short term capital gain—————————————————–1,775,000

Nest short term ———————————————————————-1,775,000

Short term capital gain————————————————————532,500

As of 2019, the capital gain rate is 50%, however there are some ways to reduce the capital gain tax, we shortly mention here and we describe each in following articles.

• Donate assets to registered charity or even well-known private foundation
• Chose the right time to sell your investment property.
• People who own small business, fishing property or farm can use the life time Capital gain exemption(LCGE)