Capital Gains Tax in Canada

Capital Gains Tax

How Much Capital Gains Tax Do You Pay?

A capital gain occurs when you sell or are considered to have sold a capital property for more than its cost. This cost includes the adjusted cost base (ACB) and any outlays or expenses incurred to make the sale. Capital gains tax applies to these sales and if you make a loss on the sale, it can be used to offset any other capital gains.

Calculating Capital Gain or Loss

To calculate your capital gains or losses, prepare the following information.

  1. The Proceeds of the Disposition
  2. The Adjusted Cost Base (ACB)
  3. The Outlays and Expenses that Incurred in the Sale of the Property

Subtract the total Adjusted Cost Base and any Outlays and Expenses from the Proceeds of the Disposition. The amount you get is your capital gain or loss and is needed on your tax return.

Capital Gains Tax

Calculating Capital Gains or Losses in Foreign Currency

  1. First, convert the proceeds of the disposition to Canadian dollars using either the Exchange Rates or Annual Average Exchange Rates (2007 to 2017) in effect at the time of the sale.
  2. Then, convert the ACB (Adjusted Cost Base) of the property to Canadian dollars using the exchange rate that was in effect at the time of the acquisition of the property.
  3. Finally, convert the outlays and expenses to Canadian dollars using the exchange rate in effect at the time in which they occurred.

Zero-Rated Capital Gains Tax

Any capital gain that incurs as a result of a donation to a qualified donee and is of any of the following properties may be eligible to an inclusion rate of zero.

  • Shares of a Capital Stock of a Mutual Fund Corporation
  • Unit of a Mutual Trust Fund
  • Interest in a Related Segregated Fund Trust
  • Prescribed Debt Obligation (Not a Linked Note)
  • Ecologically Sensitive Land
    • Including a Covenant or Easement
    • In Quebec this can be a Personal Servitude or Real Servitude Donated to Certain Qualified Donees Other than a Private Foundation

Capital Losses in Capital Gains Tax

If the Adjusted Cost Base (ACB) and the Outlays & Expenses are higher than the Proceeds of the Disposition, this is a capital loss. Half of this capital loss can be used against any taxable gains in the tax year. Additionally, if your loss is higher than all taxable capital gains for the year, it becomes part of the calculation used for your net capital loss for the year. The net capital loss can be used to reduce your taxable capital gain in any of the 3 preceding years, or in any future year.

If you would like to read more about how your capital gains are dealt with during your tax return, visit the CRA’s website and find information on Line 12700 – Taxable Capital Gains by clicking here.