Tax Tips

21 Tax Tips #2 Capital Gains

Capital gains is anytime that you make taxable income or have a loss of taxable income, from selling items owned by you or your business, or disposing of financial investment products. The taxable amount of income from Capital Gains is 50% of the income (capital gain), or you can claim 50% of the capital loss for a deduction against income. This loss can be applied to the previous 3 years tax returns, or forward into the future for up to 20 years.

A Superficial Loss occurs when you or someone affiliated, buys more identical property in the 30 days before or after a disposition, and still holds the property 30 days after the sale - the loss cannot be claimed on your tax return, however this amount can be added to the adjusted cost base of the sale of substitute property when disposed.

Investment Products

It’s important to remember that CRA receives reports of the sale/disposition value of your investment products, but not always the purchase value (cost), rarely any of the deductible expenses, and never the transaction dates.

If you don’t track your investment costs and expenses carefully for the amounts and dates of transactions, you will likely have to pay more income tax than you are actually due to pay.

Selling Personal-Use Items

Much less known is that capital gains should be reported on all items purchased and then sold for $1,000+ profit - but as always, profit is calculated by subtracting the initial purchase costs and sales costs (not improvements on the item), from the final sale amount.

However, Capital Loss cannot be claimed against the loss of value of personal items sold.

Recreational vehicles, art, and personal collectables, while not normally a capital investment purchase intended to increase in value, could have capital gains reported on a tax return if they're sold for $1,000 or more over the purchase price.

To avoid this, if you’re hosting a garage sale or privately trying to sell a collection of items, be sure to break up the collections and sell them to individual people in packages less than $1,000, so that there is no risk of capital gains tax being due.

For more details and information, Please Click the CRA website here: Capital Gains

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