What is it?
Capital Gains are accumulated when you sell assets. Examples of assets that may be considered for capital gains when you sell, or are considered to have sold, by the Canadian Revenue Agency include securities in the form of shares and stocks as well as real estate.
Capital Gains can only occur when you sell your asset for more than the amount you paid for it, plus any expense that can be legitimately added to it.
How is it taxed?
The CRA has a great step by step process for calculating Capital Gains. Here’s a great resource to help you learn how to calculate capital gains.
Capital Gains are calculated from your marginal tax rate. If you are in the 33% tax bracket here is how you would calculate your Capital Gain:
Profit = $60,000 X 50% = $30,000
The taxable profit is $30,000 multiplied by your marginal tax rate (33%) = the tax you owe would be approx $9,900.
How to keep more of it for yourself
Many people ask me how to reduce their total tax burden. Here are a few ways to legally reduce your Capital Gains:
- A loss for other capital investments. If your losses drop below $0 you cannot claim the loss against regular income. There may be an exception to this rule for small businesses or corporations.
- The sale of your primary residence is not subject to Capital Gains. The CRA may revoke this rule if they deem the sale of your primary residence to be an act of trade in your primary business. It is prudent to be aware of this.
- You can donate your gains to registered charities or private foundations.
- You may deter your Capital Gains if you don’t expect to receive your profit for some time after the sale.
For more information you can visit the CRA website to learn more about how Capital Gains affect you.
If you have any questions, you can reach out to me at any time. I will be happy to help however I can, because it’s important to me that you know things too.