Effective June 25, 2024 there will be changes to how Capital Gains Taxes are calculated and some of us will be affected, Capital Gains is not something new, it has been a part of our financial picture for many years.  There is a lot of misinformation floating around, and the media seems to thrive on scaring the heck out of the general public.  The biggest questions we hear is this:

 

Effective June 25, 2024, there will be changes to how Capital Gains Taxes are calculated and some of us will be affected, Capital Gains is not something new, it has been a part of our financial picture for many years.  There is a lot of misinformation floating around, and the media seems to thrive on scaring the heck out of the general public.  The biggest questions we hear is this:

“I’ve lived in my home for 30 years and will sell it when I retire, but will I have to pay these Capital Gains Taxes I am hearing about?”   NO!  You do NOT currently pay Capital Gains Taxes on the sale of your personal residence!!!   (there are exceptions).

Personal Capital Gains Taxes are paid when you profit from selling certain assets such as rental properties, cottages and summer residences, businesses and investments that are not held in accounts where they are tax exempt.

What exactly is a Capital Gain?  
It is when you sell (or, in some cases transfer) an asset for a profit. You purchased your cottage for $500,000 and you then sold it for $800,000 the profit of $300,000 is the Capital Gain. False news reports would have you believe that you owe that (or 50% of that) to the Government!  You do NOT! That is where the tax calculations begin!

Here is an example of how the Capital Gain of $300,000 would be calculated:
The first $250,000 of your capital gain is calculated at 50% which would be $125,000.

The amount over $250,000 of your capital gain (in this example $50,000) is calculated at 66.7% which would be $33,350.

The total of these sums would be a net Capital Gain of $158,350.

BUT WAIT! It gets better! You may be eligible for deductions on this sum! If you spent any money improving, renovating, or repairing the asset, as well as the cost of selling the asset (the commission you paid to your realtor and your legal fees), these amounts can be deducted from the sum. You will require proof of these expenses to be able to qualify them. For this example, let’s discuss that you paid out $30,000 for updates and renovations (that you have receipts for) and your selling costs totalled $47,000 you would be eligible to deduct a further $77,000 from the taxable amount leaving you with a “Taxable Capital Gain” of $81,350 and this amount would then be added to your taxable income.

You would be charged income tax on this final amount of $81,350 and NOT the original $300,000.

Think you can beat this? Think again…
Many are thinking that if they simply “transfer” the property to their children they can dodge this bullet. Think again! If you transfer your asset to your family member, YOU would still be responsible for the same capital gains tax based on the value of that asset at the time of transfer. Not only that, but your family member would also be responsible for the Land Transfer Taxes which are calculated on the current market value of the property at the time of transfer.  *EXEMPTIONS MAY APPLY*

How much income tax you will owe at the time of filing is dependent upon your own personal situation, your income level, etc.  This information should be considered general information and the author does not qualify herself as an Accountant. It is recommended you speak to an Accountant about your personal situation.  Business sales and some investments are also calculated differently than real property and you will want to have that conversation with your trusted financial representative.