Capital Gains Tax in Canada

Capital Gains Tax is the tax you pay on the profit (gain) you make from selling an asset that has increased in value.

It’s not charged on the total amount you receive but rather on the difference between what you sold it for and your adjusted cost base (ACB), which includes the purchase price and any associated costs like legal fees or renovations.

When you sell a property or an asset (like stocks or bonds) for more than what it costs you, that extra money you make is called a capital gain.

This gain isn’t just about what you sold it for minus what you paid; it also considers costs like legal fees or real estate agent commissions you paid to make the sale happen. This total expense is known as the Adjusted Cost Base (ACB).

What is the Capital Gains Tax in Canada?

In Canada, only 50% of total capital gains are taxable. Capital gains are included in your annual taxable income and taxed at your marginal tax rate.

Capital gains only apply when you sell an asset at a profit.

What is a Capital Loss?

A capital loss happens if you sell your asset for less than your total costs (again, that’s your ACB plus any sale-related expenses). While losing money is not great, capital losses aren’t a total wash because they can reduce your taxable capital gains, potentially lowering your tax bill.