Canadian Capital Gains Exemption
To plan an effective financial strategy, you should consider capital gains. They often provide some deductions at the end of your tax year, which can reduce your tax liability.
For example, if you own corporate shares and sell them, you may be eligible for a Canadian capital gains exemption of up to $835,716 (2017). The first $835,716 profit from the sale of those shares will not be taxable. With careful tax planning, you can maximize the tax-free capital gains and shelter the most cash from taxation.
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What Types of Assets Generate Capital Gains?
Besides selling your shares, the following categories of property can also generate capital gains when sold. Cottages, equipment used in an active business, real estate, mutual fund trust units, land
Separating Capital Gains and Losses
While capital gains mean that your investments have paid off and made a profit, the opposite sometimes happens. A capital loss means that the investment has lost value. At the end of your tax year, the value of your asset is now lower than its original value and is counted as a loss.
Of course, only gained capital is taxed. While a loss is always difficult to live with, it is possible to take advantage of it to reduce the amount of tax payable on profits. Depending on your situation, you may be able to use your capital losses to claim the exemption for the previous three years, the same year, or future years.
This is the kind of top-notch accounting service you get when you deal with EB Conseil Fiscal Inc. Our experts are always on the lookout for ways to optimize the Canadian capital gains exemption.
How Does the Capital Gains Tax Work?
In Canada, the law requires that any capital property sold for more than the original amount paid by the investor be taxed by the Canada Revenue Agency (CRA). For this profit, CRA demands a tax on 50% of the capital gain amount.
For example, if you sell a cottage for $400,000 and paid $200,000 for it, you have realized a capital gain of $200,000. From this amount, $100,000 is considered taxable. The CRA then taxes you based on your income and the tax bracket you are in.
It is important to note that your latent investment gains are considered unrealized capital gains. As such, they are not taxable until the investments are sold.
What Information Should You Have on Hand?
Although EB Conseil Fiscal Inc. will help you optimize the Canadian capital gains exemption, you must have certain information ready:
Be sure to keep all documents related to the purchase of the property at the time of your acquisition and all documents related to the sale of the property (transfer). These documents must include the purchase price and the date of the purchase of the property.
- For shares, you must also specify the number of shares sold, the name of the company from which they originated, and the type of shares. When you sell your shares, you will receive an RL-18 slip for Quebec (or a T5008 slip for the rest of Canada) from the broker. Remember to keep it in a safe place!
Plan Your Tax Optimization
In addition to optimizing the Canadian capital gains exemption planned with EB Conseil Fiscal Inc. you can implement these practices:
Don’t be discouraged by capital losses. Instead, use them to offset your capital gains taxes.
Some types of accounts pay more than others. By investing through a tax-advantaged account, you can reduce the amount of tax you pay.
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Optimizing Your Canadian Capital Gains Exemption with EB Conseil Fiscal Inc.
At EB Conseil Fiscal Inc. we analyze the options available to you so you can reduce the taxable amount of your capital gains.
With the proper optimization of any exemption, you will keep more money in your pocket and maximize the financial potential of your investments. Working with experts really does pay off!