Capital Gains Calculation

Capital gain tax on sale of income property

Let’s use an example to illustrate.

Say you purchase a property for $250,000, and you sell it for $350,000 and assuming the property is buy and hold.

Capital gain = $350,000 – $250,000 = $100,000.

In Canada, only 50% of capital gain is taxable, hence 50% of $100,000 is taxable = $50,000.

If you own the property in your own personal name, this $50,000 is added on top of your other income and is subject to the marginal tax rate for the respective tax brackets you are in.

For simplicity’s sake, we use the HIGHEST marginal tax rate in Ontario in our calculation – 53.53%, round it down to 50%.

Hence tax liability is roughly $50,000 x 50% = $25,000.

Keep in mind that if you make less than $220,000 personally BEFORE you add in this $50,000, you will be subject to lower tax.

$25,000 is MAXIMUM you would have to pay on the capital gain.

If you own the property in your corporation, the numbers would pretty much the same. 50% is taxable but the taxable portion is considered passive income.

Passive income is taxed at slightly over 50%.   Hence, you do the same calculation as above. Take $100,000 x ½ (50% taxable) x 50% (rough tax rate on passive income) = $25,000.

Next time when you are trying to estimate the amount of taxes you would owe when you sell a property, simply take the gain and multiply it by 25%. This will give you a really good idea of how much you would have to pay.

Sanjin, who is fluent in English, Serbian and Croatian, was born in former Yugoslavia.  He moved to Vancouver in 1993, where he fell in love with this city's natural beauty and wonders. Coming from mechanical engineering background, and working with Canadian Airlines and Air Canada technical departments for over 16 years, he decided it was time to pursue his new passion. In 2007 Sanjin started his Real Estate career, when he joined CENTURY 21 In Town Realty office in downtown Vancouver and became full-service REALTOR®. Sanjin chose to work with CENTURY 21® because of the company’s strong reputation as being bold, experienced, stable, and trustworthy, and also being one of the industry leaders when it comes to Real Estate, having an international reach and exposure. Sanjin is passionate about real estate, our incredible city, and working closely with people to achieve their goals. This passion has resulted in several awards like Century 21's Masters Ruby Award. Sanjin's passion above and beyond real estate is creating art, painting with acrylics on canvas, as well as local charity. Giving back to others in his community is very important to Sanjin, and that's why he is a proud sponsor of local Easter Seals.

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