How to Calculate Tax on Real Estate Sale Income
Understanding capital gains tax calculation when selling real estate in Canada.
A capital gain is realized when an asset sells above its adjusted cost basis (ACB). Unlike the U.S., Canada’s tax authority doesn’t distinguish between short and long-term gains.
How capital gains work
The historical 50% figure represents the inclusion rate, not the tax rate. Changes effective June 24, 2024: the inclusion rate increases from 50% to 66.7% for all corporations and trusts. For individuals: 50% inclusion on first $250,000 annually; 66.7% on amounts exceeding $250,000.
Tax reduction strategies
Principal residence exemption
Properties must meet specific criteria including being designated as the primary residence and meeting ownership conditions.
Capital losses
Losses offset capital gains, reducing tax liability.
Expense documentation
Deductible costs include: renovations, maintenance, commissions, legal fees, surveyor fees, transfer taxes, and advertising expenses.