Capital Gains Tax: Everything You Need to Know
Understanding Capital Gains Tax in Canada
Capital gains tax is a tax on the profit you make when you sell an asset that has increased in value. In Canada, capital gains are taxed at a rate of 50% of your marginal tax rate. However, there are some exceptions to this rule, such as the Principal Residence Exemption, which allows you to sell your principal residence tax-free.
Calculating Capital Gains and Losses
To calculate your capital gain or loss, you need to know the following three amounts:
- The adjusted cost base (ACB) of the asset
- The proceeds of disposition (the amount you sell the asset for)
- Any outlays or expenses you incurred in selling the asset
Once you have these numbers, you can use the following formula to calculate your capital gain or loss:
``` Capital gain or loss = Proceeds of disposition - ACB - Outlays ```Conclusion
Understanding capital gains tax is essential for anyone who owns or plans to sell assets in Canada. By following the information in this article, you can ensure that you are aware of your tax obligations and can make informed decisions about your investments.
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