When it comes to real estate in Toronto, a lot of investors have accrued unrealized gains as their property values have increased rapidly in the past few years. We have seen some investors in the GTA realize up to 100%-200% returns on their investment which is amazing. As everyone knows, real estate in Canada in general has been in a boom for several years, how long this will last no one can answer. However what we do know for certain is that when you sell your investment property you will have a capital gain for tax purposes.
The Gains & Tax Implications
Determining your gain for tax purposes when selling your investment property in Toronto is as follows:
Capital Gain = (Proceeds of disposition - Adjusted Cost Base of the property)
Please keep in mind that only 1/2 of the capital gain is taxable.
Ways to Minimize Taxes
When it comes to determining the adjusted cost base, you can include all additional capital expenditures on real estate in Toronto you have invested in the property as improvements, this will thus reduce the capital gain.
Also, you can deduct any real estate commissions, legal fees, land transfer taxes and any other necessary selling costs as part of the transaction.
If you want to avoid recapture on the transaction, which is an income inclusion from claiming prior years of CCA ( capital cost allowances), we suggest not to claim CCA throughout the investment period.
For more questions, please contact us anytime at 416-214-0527.