How much is capital gains tax and how can I save money on capital gains when I go to sell a property?

Well, when you’re selling an investment property, or a secondary property, 50% of the net profit from that sale will be added on to your income for the year and taxed at whatever your marginal tax rate is.

So for example if I bought a house for $400,000 and then I sold it later for $500,000, I’d be dealing with a $100,000 profit, so 50% of that $50,000 would get added on to my annual income for the year that the property closed and I’d be taxed at whatever that marginal tax rate is for my specific income.

(Source: Tax Tips)

For this reason for a lot of people you are better, if you are selling multiple investment properties, to do it in multiple years, that way you avoid bringing your income up too high and being charged at the top tax bracket. There are also several deductions that you can use to reduce the amount of capital gains tax that you pay. For example:

• Any real estate or lawyers fees plus the HST that are used for the sale of the property, you can use to reduce the profit,
• You can add your land transfer tax from when you purchased the house onto the purchase price, again to reduce the profit.
• Any capital costs can be reduced as well. So a capital cost is a major improvement done to the property, for example replacing all the old windows with new windows, you can reduce that amount from the profit to lower your capital gains. Now you can not reduce the cost of any maintenance items, for example having repaired the furnace or doing painting touch-ups, those wouldn’t count.

If you have any questions about how to save money on capital gains tax for when you go to sell a property, please comment below or contact us here! Thanks and have a great day.