With the changes to the inclusion rates in June, many people have taken a closer look at the Capital Gains Tax in Canada. This blog post will outline what a capital gain or loss is, and why it may matter for your taxes.
Essentially, if you’ve recently earned profit from selling an investment, you may be required to pay capital gains tax. In Canada, capital gains or losses are realized when assets are sold and are subject to capital gains tax. What counts as an asset in this instance? This could be referring to things outside of employment income such as stocks, bonds, real estate, property, etc.
In simple terms, capital gain occurs when you sell an asset for more than it has cost you, and a capital loss occurs when you sell an asset for less than it has cost you.
In Canada, the taxable capital gain must be reported as income on your tax return for the year the asset was sold. The amount will be taxed depending on your inclusion and marginal tax rates.
To minimize your tax burden, you can use accounts such as the TFSA or RRSP. Capital losses can be also used to offset a capital gain. As everyone’s situation is unique, you should be sure to consider the best strategy for your own circumstances when it comes to capital gains.