Capital Gains Exemption –

Distinctive Advisors Inc.

Menu

Distinctive Real Estate Advisors Inc., Brokerage | Distinctive Real Estate Advisors Inc., Mortgage Broker License #12592

Tag Archives: Capital Gains Exemption

Capital Gains Tax Exemption Spared

With the federal government deficit growing and the economy fueled only by the leaps and bounds of the housing market, it is a natural segue to think “how can we, as a country, capitalize on it?” which has brought on much talk in the news of a hike to the capital gains tax.

What is capital gains tax?

  • Capital Gains tax is a 50% tax on the increase of an investment.
  • Investments could include stocks, real estate and many other assets.

What is the “exemption” on Capital Gains Tax?

There are two types of exemptions on capital gains that are spoken about:

  1. The 50% tax on the increase of an investment. This is intended to encourage people to invest in the economy, but some believe it is rewarding the wealthy. For example, if someone buys a stock for $100 and sells it later for $140, the increase is $40. They have to pay tax on $20 and the other $20 they get to keep without paying tax on, hence called the “50% tax exemption”.
  2. The exemption for principal residences. When you go to sell your home that you live in, even though it is an investment in an asset that has appreciated over time, you do not have to pay capital gains tax on any part of the increase. For example, if you have been living in a house that you bought 10 years ago for $200,000 and sold it this year for $500,000, you would not be taxed on the increase of $300,000.

Last week in Ontario, the Liberals proposed reducing the capital gains tax exemption to zero, meaning all investments would be taxed as income. This proposal was rejected by the federal government.

Other proposals that were rejected include:

  • An “inheritance tax” on all assets over $2 Million;
  • Increase capital gains tax by a 62-38 margin.

Many Canadians rely on their primary residence as an investment that they can cash in for their retirement. Today, with the real estate market buying frenzy, more retirees are holding onto their homes since down-sizing is not necessarily more affordable. If the capital gains tax exemption on principal residences were removed, it would have a significant impact on the life savings and retirement plans of many Canadians, but for now, they’ve been spared.

If you would like assistance with your investment plan, downsizing or planning the best path forward to maximize your life savings in your real estate asset, call us today. Our team will help you make a plan to meet your personal investment goals.

Connect With Us