A capital gain or loss occurs when you sell a capital asset. This includes physical assets such as real estate, art, and collectibles. It also includes investments such as stocks, bonds, ETFs and mutual funds. Items considered for personal use such as cars, furniture and boats are not applicable unless they are considered business assets.
Capital gains tax is assessed at 50%. For example, if you realize a gain of $100,000 on the sale of your investment property, $50,000 is the taxable amount of the capital gain. This is called the taxable capital gain. Your overall capital gains tax rate depends on your annual taxable income and the tax bracket that you fall into.
Allowable capital losses are 50% of the total capital loss. Capital losses can only be used to offset other capital gains. If the allowable capital losses in a year exceed the taxable capital gains, the net capital loss can be carried back up to three years to offset taxable capital gains. They can also be carried forward indefinitely to be applied against taxable capital gains in the future.
For more information about capital gains, or to ask specific questions regarding this or other income tax topics, please contact us to book a free consultation.