How do I calculate capital gains tax?
In Canada, you pay tax on half of realized capital gains. This means that half of the money you earn from selling an asset is taxed, and the other half is yours to keep tax-free!
To calculate your capital gain or loss, follow these steps:
- Determine the adjusted cost base of your asset. This is what you paid to acquire the asset plus related costs like transaction fees, brokerage fees and commissions.
- Subtract the adjusted cost base from the Canadian-dollar value for which you exchanged or sold the asset.
- Divide the resulting figure in half.
This amount counts as part of your income and will be taxed based on the amount you earn, the province or territory in which you live and any tax deductions you can get your hands on.
Remember that you’re only taxed on assets you dispose of. So, when calculating capital gains, don’t factor in the buying or selling costs of any assets you’re still holding onto.