6 things to know about capital gains and taxes for people across Canada
November 2, 2023 | Posted by: DLC West Coast Mortgages
So, you made some cash selling your property or stocks at a higher price than you bought them for? High five! But before you start celebrating, there's this thing called capital gains that might show up on your tax return. Here's a friendly chat about what you need to know, in simple terms.
1. What's Up with Taxes on Capital Gains?
Capital gains are kinda like a 50-50 deal when it comes to taxes. Only half of what you earned from selling your stuff gets taxed. But how much tax you pay depends on your yearly income. So, if you sold a building for more than you bought it, only half of that profit gets added to your income and taxed accordingly. Higher income, more tax - that's the game.
2. Capital Gains vs. Losses
Sold something for less than you paid? That's a capital loss, my friend. But it's not all bad news. You can use these losses to reduce the taxes on your gains. If your losses are more than your gains, you can even use them to lower your taxes in the past or future years.
3. Keep Your Papers in Order
When it comes to declaring capital gains, paperwork is king. Keep track of when you bought and sold things, the costs, commissions, and any other expenses. Trust me, having these documents handy will make your life easier when tax time rolls around.
4. Gifts and Sales: What's the Deal?
Gave something away or sold it for less to a family member? The tax folks will act like you sold it for its full market value. So, you might still owe taxes on a bigger gain than you expected.
5. Splitting Gains with Your Better Half
Generally, you can't just split capital gains with your spouse to save on taxes. There are some rules around this. But if you both bought something together and paid equal shares, then you can split the gains equally too.
6. Smart Planning for Your Gain
Got a feeling you'll sell something for more than you bought it? Plan ahead! Maybe sell some stuff that's not doing so well, or put more into your retirement savings to lower your taxes for the year. Timing can also be key - if your income is lower in a particular year, reporting your gain then could mean less tax.
Remember, this chat is just a friendly overview. It's super important to chat with your accountant or tax professional for advice tailored to your situation. They're the pros who can guide you through the nitty-gritty of your finances. Stay smart and stay informed!
Disclaimer: This information is for general understanding and should not be used as a substitute for seeking professional guidance from an accountant or tax professional. Laws and tax regulations can be complex and change over time, so it's always a good idea to get personalized advice from the experts.
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