As professional Tax Accountants in Toronto downtown, we work with you to reduce your Capital Gains Tax. If you have any questions in regards to Capital Gains Taxes, feel free to contact as at 416.454.8812 or by email at mina.hanna@accountingontrack.com . As tax accountants specializing in real estate, we work with our clients to create an effective tax planning strategy to use all allotted exemptions and defer capital gains as much as possible.

Capital gains tax is due when you sell an asset or investment for more than what you paid for, with a 50% of the difference being added to your regular income. In Canada, there are a few major exemptions, and rules which may allow you to reduce your tax, depending on lot of factors.

While opening a registered account to shelter investments and using the principal-residence exemption to reduce capital gains tax on residential property are the two most basic tax saving strategies you can use to reduce your capital gains taxes. However, there are more into Capital Gains Taxes you should be aware of.

 

The Fundamentals ABC

You have to declare capital gains when you sell property or investments for more than what you paid for.

For example, if you bought an asset for $100,000 and sold it for $200,000, you have to declare a $100,000 capital gain in the year you sold the asset. The capital gains inclusion rate is 50% , so you would include $50,000 in your total taxable income of this year when you disposed the asset.

The inclusion rate is the same for everyone, but the amount of tax you pay depends on your total income, personal situation and your province of residence.

There are no capital gains triggered on the sale of your principal residence

There are no capital gains triggered on the sale of investments inside a registered plan such as RRSP or a RRIF,”

Capital gains are calculated based on the market value of the asset sold less the cost of acquiring that asset. As professional Tax Accountants in Toronto downtown specializing in real estate, we work with our clients to create an effective tax planning strategy to use all allotted exemptions and defer capital gains
as much as possible. If you have any questions in regards to Capital Gains Taxes, feel free to contact as at 416.454.8812 or by email at mina.hanna@accountingontrack.com .

Timing Your Transaction

Choosing the time of sale for your investment assets can be a powerful tool for tax reduction.

If you’re planning to sell investment assets that have made a profit, consider postponing the sale until after January 1 of the next year. You will incur capital gains tax that year and only have to pay by April 30 of the following year.

If your income fluctuates from year to year, selling during a year when it is lower will save you a lot of taxes.

If you have investment assets that have lost money, selling them in the same year as profitable ones will allow you to apply the loss against the profits and reduce your overall capital gains tax.

 

Charitable Donations – Gifts – Giving Away Assets

If you are making regular charitable donations or want to give money to family members, you can use donations or gifts to reduce your capital gains tax.

For example, if you plan to make a $1,000 donation to a charity, you can donate shares (stocks) which has a value of $1,000 rather than selling the shares (stocks), paying capital gains tax and adding cash to make up the $1,000 donation, making the donation in shares entitles you to the $1,000 charitable receipt for tax purposes, while not triggering capital gains tax.

Gifts to family members trigger capital gains tax, the CRA deems a gift to be a taxable disposition of an asset. Despite this, you could save money by giving an asset that has generated a loss, but that you want to keep in the family.

Gifting the asset produces a capital loss that you can apply to gains from other investments, while your family member reaps the future benefits of it.

 

Lifetime Capital Gains Exemption – LTCGE

One of the very generous aspects of Canadian taxes is the lifetime capital gains exemption.
If you own a business or operate a farm property successfully over an extended period of time, presumably it should have increased in value and you may, at some point, want to sell the business for example to retire. When this is the case, you may be completely exempt from tax, If you sold qualifying property, your gains of up to $800,000

 

What is considered to be active business?

Because businesses have to use at least 90 percent of their assets in an active business operating primarily in Canada to qualify, consider selling the business at a time when it can fulfill these requirements. To qualify for the Lifetime Capital Gains Exemption.

As professional Tax Accountants in Toronto downtown, we work small business owners to make sure they understand and carefully plan for their retirement or exit strategy and take advance of the LTCGE
Lifetime Capital Gains Exemption

If you have any questions in regards to Capital Gains Taxes, feel free to contact as at 416.454.8812 or by email at mina.hanna@accountingontrack.com and one of our professional Tax Accountants in Toronto downtown, will be happy to help you and answer any questions you may have.