{"id":3093,"date":"2022-11-11T19:22:00","date_gmt":"2022-11-11T19:22:00","guid":{"rendered":"https:\/\/dev.wahi.com\/ca\/en\/?p=3093"},"modified":"2025-11-17T11:30:57","modified_gmt":"2025-11-17T16:30:57","slug":"how-to-legally-avoid-capital-gains-tax-in-canada","status":"publish","type":"post","link":"https:\/\/wahi.com\/ca\/en\/learning-centre\/real-estate-101\/invest\/avoid-capital-gains","title":{"rendered":"How to (Legally) Avoid Capital Gains Tax in Canada"},"content":{"rendered":"<p>[et_pb_section fb_built=&#8221;1&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; custom_padding=&#8221;55px||||false|false&#8221; da_disable_devices=&#8221;off|off|off&#8221; global_colors_info=&#8221;{}&#8221; custom_margin__hover_enabled=&#8221;off|desktop&#8221; da_is_popup=&#8221;off&#8221; da_exit_intent=&#8221;off&#8221; da_has_close=&#8221;on&#8221; da_alt_close=&#8221;off&#8221; da_dark_close=&#8221;off&#8221; da_not_modal=&#8221;on&#8221; da_is_singular=&#8221;off&#8221; da_with_loader=&#8221;off&#8221; da_has_shadow=&#8221;on&#8221;][et_pb_row _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; width=&#8221;95%&#8221; max_width=&#8221;100%&#8221; custom_margin=&#8221;||-24px||false|false&#8221; custom_padding=&#8221;55px||||false|false&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][wahi_breadcrumb _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][wahi_breadcrumb-link title=&#8221;Real Estate 101&#8243; _builder_version=&#8221;4.18.0&#8243; _dynamic_attributes=&#8221;link_option_url&#8221; _module_preset=&#8221;default&#8221; link_option_url=&#8221;@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9saW5rX3VybF9wYWdlIiwic2V0dGluZ3MiOnsicG9zdF9pZCI6IjcyMiJ9fQ==@&#8221; global_colors_info=&#8221;{}&#8221;][\/wahi_breadcrumb-link][wahi_breadcrumb-link title=&#8221;Invest&#8221; _builder_version=&#8221;4.18.0&#8243; _dynamic_attributes=&#8221;link_option_url&#8221; _module_preset=&#8221;default&#8221; link_option_url=&#8221;@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9saW5rX3VybF9wYWdlIiwic2V0dGluZ3MiOnsicG9zdF9pZCI6IjI5NDcifX0=@&#8221; global_colors_info=&#8221;{}&#8221;][\/wahi_breadcrumb-link][wahi_breadcrumb-link title=&#8221;@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF90aXRsZSIsInNldHRpbmdzIjp7ImJlZm9yZSI6IiIsImFmdGVyIjoiIn19@&#8221; _builder_version=&#8221;4.18.0&#8243; _dynamic_attributes=&#8221;title&#8221; _module_preset=&#8221;default&#8221; module_text_color=&#8221;#686E6E&#8221; global_colors_info=&#8221;{}&#8221;][\/wahi_breadcrumb-link][\/wahi_breadcrumb][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; custom_padding=&#8221;12px||12px||false|false&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_text _builder_version=&#8221;4.18.0&#8243; _dynamic_attributes=&#8221;content&#8221; _module_preset=&#8221;default&#8221; header_font_size=&#8221;3.5rem&#8221; header_line_height=&#8221;4.5rem&#8221; header_font_size_tablet=&#8221;42px&#8221; header_font_size_phone=&#8221;3rem&#8221; header_font_size_last_edited=&#8221;on|phone&#8221; header_line_height_tablet=&#8221;4.5rem&#8221; header_line_height_phone=&#8221;3.2rem&#8221; header_line_height_last_edited=&#8221;on|desktop&#8221; global_colors_info=&#8221;{}&#8221;]@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF90aXRsZSIsInNldHRpbmdzIjp7ImJlZm9yZSI6IjxoMT4iLCJhZnRlciI6IjwvaDE+In19@[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; custom_padding=&#8221;4px||9px|||&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][wahi_socialsharing _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/wahi_socialsharing][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; custom_padding=&#8221;6px|||||&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_text _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; text_font_size=&#8221;24px&#8221; text_line_height=&#8221;1.5em&#8221; custom_margin=&#8221;||15px|||&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<div class=\"at-text aem-GridColumn aem-GridColumn--default--12\">\n<div class=\"BaseText_root__2z8vX color-black BaseText_size-body2__KL-IS BaseText_custom-font__Z5-9a BaseText_font-family--lato__3NBjB\">\n<p><span>Before purchasing an investment property, be sure to understand how capital gains tax works and the ways in which you may be able to reduce the amount you pay.<\/span><\/p>\n<\/div>\n<\/div>\n<p>[\/et_pb_text][et_pb_text _builder_version=&#8221;4.27.4&#8243; _module_preset=&#8221;default&#8221; text_font_size=&#8221;1.13rem&#8221; text_line_height=&#8221;1.18rem&#8221; custom_margin=&#8221;||5px|||&#8221; global_colors_info=&#8221;{}&#8221;]By <a href=\"https:\/\/wahi.com\/ca\/en\/author\/emily-southey\/\">Emily Southey<\/a> | 15 minute read[\/et_pb_text][et_pb_post_title title=&#8221;off&#8221; author=&#8221;off&#8221; date_format=&#8221;M j&#8221; categories=&#8221;off&#8221; comments=&#8221;off&#8221; featured_image=&#8221;off&#8221; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/et_pb_post_title][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; width_tablet=&#8221;&#8221; width_phone=&#8221;100%&#8221; width_last_edited=&#8221;on|phone&#8221; max_width_tablet=&#8221;&#8221; max_width_phone=&#8221;100%&#8221; max_width_last_edited=&#8221;on|phone&#8221; custom_padding=&#8221;21px||||false|false&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_image src=&#8221;@ET-DC@eyJkeW5hbWljIjp0cnVlLCJjb250ZW50IjoicG9zdF9mZWF0dXJlZF9pbWFnZSIsInNldHRpbmdzIjp7fX0=@&#8221; align=&#8221;center&#8221; force_fullwidth=&#8221;on&#8221; _builder_version=&#8221;4.18.0&#8243; _dynamic_attributes=&#8221;src&#8221; _module_preset=&#8221;default&#8221; custom_padding=&#8221;2px|||||&#8221; border_radii=&#8221;on|32px|32px|32px|32px&#8221; border_radii_tablet=&#8221;on|32px|32px|32px|32px&#8221; border_radii_phone=&#8221;on|0px|0px|0px|0px&#8221; border_radii_last_edited=&#8221;on|phone&#8221; global_colors_info=&#8221;{}&#8221;][\/et_pb_image][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; custom_padding=&#8221;||40px|||&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_text _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; text_font_size=&#8221;21px&#8221; text_line_height=&#8221;1.6em&#8221; header_2_font=&#8221;||||||||&#8221; header_2_font_size=&#8221;36px&#8221; header_2_line_height=&#8221;1.3em&#8221; header_3_font_size=&#8221;1.25rem&#8221; header_3_line_height=&#8221;1.88rem&#8221; header_4_font=&#8221;|700|||||||&#8221; header_4_font_size=&#8221;1.25rem&#8221; header_4_line_height=&#8221;1.88rem&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<p class=\"p1\">Are you a <a href=\"https:\/\/wahi.com\/ca\/en\/real-estate\/on\">real estate investor<\/a> who wants to know how to avoid capital gains tax in Canada? You\u2019ve come to the right place. Keep reading to learn all about how capital gains tax works in Canada and our top tips on how you can keep more of your money while still complying with Canadian law.\u00a0<\/p>\n<p class=\"p1\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<h2 class=\"p3\">Capital Gains Tax in Canada<\/h2>\n<p class=\"p1\">As a real estate investor, it\u2019s crucial to be aware of Canada\u2019s tax structure. This will help you understand the true cost of your real estate investment. In Canada, some residential property sales are subject to capital gains tax. Capital gains tax is a type of tax real estate investors may owe to the federal government when they make a profit from selling an investment property (capital gains tax is also applicable on the sale of other assets, such as stocks and bonds). Please note that capital gains tax only applies if you earn more from the sale than you originally paid. For example, if you are an investor who purchased an investment property for $600,000 and then sold it for $850,000 two years later, your capital gain is $250,000 (the difference between the purchase price and the original sale price). On your next income tax return after the property sale, you must report this amount, along with your other income.<\/p>\n<p class=\"p1\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<p class=\"p1\">Capital gains tax does not apply to all property sales. However, in most cases, it applies to investment property sales (that is, properties that are not considered principal residences). Therefore, if you are selling an investment property, you will likely need to pay capital gains tax. However, if you are selling a principal residence, you will not. The key differences between principal residences and investment properties are outlined below.\u00a0<\/p>\n<p class=\"p1\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<h3 class=\"p4\"><b>Principal residence defined<\/b><\/h3>\n<p class=\"p1\">The Canada Revenue Agency (CRA) defines a principal residence as follows:\u00a0<\/p>\n<p class=\"p1\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<ul class=\"ul1\">\n<li class=\"li1\"><span class=\"s1\"><\/span>It is a housing unit, a leasehold interest in a housing unit, or a share of the capital stock of a co-operative housing corporation you acquire only to get the right to inhabit a housing unit owned by that corporation;<\/li>\n<li class=\"li1\"><span class=\"s1\"><\/span>You own the property alone or jointly with another person;<\/li>\n<li class=\"li1\"><span class=\"s1\"><\/span>You, your current or former spouse, your common-law partner, or any of your children lived in it at some time during the year; and<\/li>\n<li class=\"li1\"><span class=\"s1\"><\/span>You designate the property as your principal residence.<\/li>\n<\/ul>\n<p class=\"p1\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<p class=\"p1\">Please note that your property is required to meet all four of the conditions listed above to be considered a principal residence. It\u2019s also worth noting that according to the CRA, a principal residence can be any of the following types of properties: house, cottage, condominium, apartment, duplex, trailer, mobile home, or houseboat.<\/p>\n<p>[\/et_pb_text][et_pb_code _builder_version=&#8221;4.27.4&#8243; _module_preset=&#8221;default&#8221; hover_enabled=&#8221;0&#8243; sticky_enabled=&#8221;0&#8243;]<script type=\"application\/ld+json\"><!-- [et_pb_line_break_holder] -->{<!-- [et_pb_line_break_holder] -->  \"@context\": \"https:\/\/schema.org\",<!-- [et_pb_line_break_holder] -->  \"@type\": \"Article\",<!-- [et_pb_line_break_holder] -->  \"headline\": \"How to (Legally) Avoid Capital Gains Tax in Canada\",<!-- [et_pb_line_break_holder] -->  \"description\": \"Before purchasing an investment property, be sure to understand how capital gains tax works and the ways in which you may be able to reduce the amount you pay.\",<!-- [et_pb_line_break_holder] -->  \"image\": \"https:\/\/wahi.com\/wp-content\/uploads\/2023\/11\/How-to-Legally-Avoid-Capital-Gains-Tax-in-Canada.jpg\",<!-- [et_pb_line_break_holder] -->  \"author\": {<!-- [et_pb_line_break_holder] -->    \"@type\": \"Person\",<!-- [et_pb_line_break_holder] -->    \"name\": \"Emily Southey\"<!-- [et_pb_line_break_holder] -->  },<!-- [et_pb_line_break_holder] -->  \"publisher\": {<!-- [et_pb_line_break_holder] -->    \"@type\": \"Organization\",<!-- [et_pb_line_break_holder] -->    \"name\": \"Wahi\",<!-- [et_pb_line_break_holder] -->    \"logo\": {<!-- [et_pb_line_break_holder] -->      \"@type\": \"ImageObject\",<!-- [et_pb_line_break_holder] -->      \"url\": \"https:\/\/wahi.com\/wp-content\/uploads\/2022\/10\/wahi-logo.svg\"<!-- [et_pb_line_break_holder] -->    }<!-- [et_pb_line_break_holder] -->  },<!-- [et_pb_line_break_holder] -->  \"mainEntityOfPage\": {<!-- [et_pb_line_break_holder] -->    \"@type\": \"WebPage\",<!-- [et_pb_line_break_holder] -->    \"@id\": \"https:\/\/wahi.com\/ca\/en\/learning-centre\/real-estate-101\/invest\/avoid-capital-gains\"<!-- [et_pb_line_break_holder] -->  },<!-- [et_pb_line_break_holder] -->  \"datePublished\": \"2023-11-11\",<!-- [et_pb_line_break_holder] -->  \"dateModified\": \"2023-11-11\"<!-- [et_pb_line_break_holder] -->}<!-- [et_pb_line_break_holder] --><\/script><!-- [et_pb_line_break_holder] -->[\/et_pb_code][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=&#8221;1&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; background_color=&#8221;#edf7f3&#8243; custom_padding=&#8221;32px||32px||true|false&#8221; da_disable_devices=&#8221;off|off|off&#8221; global_colors_info=&#8221;{}&#8221; da_is_popup=&#8221;off&#8221; da_exit_intent=&#8221;off&#8221; da_has_close=&#8221;on&#8221; da_alt_close=&#8221;off&#8221; da_dark_close=&#8221;off&#8221; da_not_modal=&#8221;on&#8221; da_is_singular=&#8221;off&#8221; da_with_loader=&#8221;off&#8221; da_has_shadow=&#8221;on&#8221;][et_pb_row _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_text _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; header_2_text_align=&#8221;center&#8221; header_2_text_color=&#8221;#38505b&#8221; header_2_font_size=&#8221;2.63rem&#8221; header_2_line_height=&#8221;3.75rem&#8221; max_width=&#8221;800px&#8221; module_alignment=&#8221;center&#8221; header_2_font_size_tablet=&#8221;32px&#8221; header_2_font_size_phone=&#8221;27px&#8221; header_2_font_size_last_edited=&#8221;on|phone&#8221; header_2_line_height_tablet=&#8221;3.75rem&#8221; header_2_line_height_phone=&#8221;32px&#8221; header_2_line_height_last_edited=&#8221;on|phone&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<h2 class=\"p1\">\u201cCapital gains tax is a tax that must be paid when capital assets are sold in Canada if they are sold at a profit. More specifically, if you earn a capital gain, you may be required to pay tax on 50% of your realized capital gain.\u201d<\/h2>\n<p>[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=&#8221;1&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; custom_padding=&#8221;||24px||false|false&#8221; da_disable_devices=&#8221;off|off|off&#8221; global_colors_info=&#8221;{}&#8221; da_is_popup=&#8221;off&#8221; da_exit_intent=&#8221;off&#8221; da_has_close=&#8221;on&#8221; da_alt_close=&#8221;off&#8221; da_dark_close=&#8221;off&#8221; da_not_modal=&#8221;on&#8221; da_is_singular=&#8221;off&#8221; da_with_loader=&#8221;off&#8221; da_has_shadow=&#8221;on&#8221;][et_pb_row _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; custom_padding=&#8221;||43px|||&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_text _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; text_font_size=&#8221;21px&#8221; text_line_height=&#8221;1.6em&#8221; header_2_font=&#8221;||||||||&#8221; header_2_font_size=&#8221;36px&#8221; header_2_line_height=&#8221;1.3em&#8221; header_3_font_size=&#8221;1.25rem&#8221; header_3_line_height=&#8221;1.88rem&#8221; header_4_font=&#8221;|700|||||||&#8221; header_4_font_size=&#8221;1.25rem&#8221; header_4_line_height=&#8221;1.88rem&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<h2 class=\"p1\">When do you pay capital gains tax on a home sale in Canada?<\/h2>\n<p class=\"p3\">Now that you know what qualifies as a principal residence and therefore exempts you from paying capital gains tax in Canada, let\u2019s dive into the scenarios in which a property owner would be required to pay capital gains tax. If any of the following is true, you should prepare to pay capital gains tax on your property sale.\u00a0<\/p>\n<p class=\"p3\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<ul class=\"ul1\">\n<li class=\"li3\"><span class=\"s1\"><\/span>The property was not your principal residence (that is, it did not meet the criteria listed above).<\/li>\n<li class=\"li3\"><span class=\"s1\"><\/span>The property was used for business purposes.\u00a0<\/li>\n<\/ul>\n<p class=\"p2\"><span style=\"color: #ffffff;\">&#8211;<\/span><\/p>\n<h2 class=\"p1\">Are there exemptions to paying capital gains tax on a home sale?<\/h2>\n<p class=\"p3\">Yes, there are a number of exemptions to capital gains tax in Canada. As alluded to above, the main exemption is the principal residence exemption. Primary residences are tax-exempt in Canada. Another capital gains tax exemption is for farm and fishing properties. If you own a farm or fishing property and sell either for a profit, the amount you earned on the sale is exempt from capital gains tax (up to a limit of $1 million). To take advantage of this tax exemption, your farm or fishing property must meet the following conditions:<\/p>\n<p class=\"p3\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<ul class=\"ul1\">\n<li class=\"li3\"><span class=\"s1\"><\/span>Shares of the capital stock of a family farm or fishing corporation owned by you, your spouse, or your common-law partner;<\/li>\n<li class=\"li3\"><span class=\"s1\"><\/span>An interest in a family farm or fishing partnership owned by you, your spouse, or your common-law partner;<\/li>\n<li class=\"li3\"><span class=\"s1\"><\/span>Real property including land, buildings, and fishing vessels; and<\/li>\n<li class=\"li3\"><span class=\"s1\"><\/span>Property included in capital cost allowance Class 14.1, such as milk and egg quotas, or fishing licences.\u00a0<\/li>\n<\/ul>\n<p class=\"p2\"><span style=\"color: #ffffff;\">&#8211;<\/span><\/p>\n<h2 class=\"p1\"><b>How Do Capital Gains Work in Canada?<\/b><\/h2>\n<p class=\"p3\">To understand how capital gains work in Canada, we are going to break down capital gains and losses. A capital gain is the amount that an investment increases in value. This investment could be a property or another type of asset, like a stock, bond, or mutual fund. If the value of the asset increases from the time you bought it, it qualifies as a capital gain and you will need to pay tax on it when you sell it. A capital gain can be further broken down into realized or unrealized capital gains, the former being when a capital gain occurs after selling the investment and the latter being when your investment has increased in value but you have yet to sell it. The good news? Real estate investors in Canada are only required to pay tax on realized capital gains.\u00a0<\/p>\n<p class=\"p3\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<p class=\"p3\">A capital loss is when the value of your investment decreases in value since it was purchased. For example, if the current value of your rental property is less than the original purchase price, it is considered a capital loss. While most investors prefer to avoid capital losses, the bright side is that they can be used to offset capital gains and reduce the amount of tax you pay.\u00a0<\/p>\n<p class=\"p3\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<h2 class=\"p1\">Capital gains tax rate in Canada<\/h2>\n<p class=\"p3\">The capital gains tax rate in Canada is not as simple as HST or GST. Rather, it relates to income tax. When you sell an investment at a profit, 50% of the capital gain is taxable. If you sell an investment property, you will need to add 50% of the capital gain to your income on your next income tax return. Therefore, the exact amount of capital gains tax you will owe varies as it depends on your other sources of income. Further, it will also depend on if you have any capital losses to offset the capital gain.\u00a0<\/p>\n<p class=\"p3\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<h2 class=\"p1\">How Are Capital Gains Calculated in Canada?<\/h2>\n<p class=\"p3\">As mentioned, real estate investors are only required to pay tax on 50% of their realized capital gain(s). In essence, only half the profit you earn from a property sale is taxable, while the other half goes right into your pocket.\u00a0\u00a0<\/p>\n<p class=\"p3\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<p class=\"p3\">To calculate the capital gains tax on a property sale in Canada, you must subtract the adjusted base cost (ABC) of the property from the sale price. To determine the ABC of the property, you will likely need to do some additional calculations. Please note that the ABC is the original purchase price of the home, including legal fees, taxes, commissions, and any upgrades or improvements made to the property. So to calculate your ABC, you must add up all of these expenses and then subtract the total from the sale price of the property. Next, divide that number in half and the amount you are left with is the amount subject to capital gains tax in Canada (that is, the amount that must be added to your overall income and reported on your income tax return). Since capital gains tax is tied to one\u2019s income and the specific amount of profit earned, the amount owed varies significantly.<\/p>\n<p>[\/et_pb_text][et_pb_code _builder_version=&#8221;4.27.4&#8243; _module_preset=&#8221;default&#8221; hover_enabled=&#8221;0&#8243; sticky_enabled=&#8221;0&#8243;]<script type=\"application\/ld+json\"><!-- [et_pb_line_break_holder] -->{<!-- [et_pb_line_break_holder] -->  \"@context\": \"https:\/\/schema.org\",<!-- [et_pb_line_break_holder] -->  \"@type\": \"FAQPage\",<!-- [et_pb_line_break_holder] -->  \"mainEntity\": [<!-- [et_pb_line_break_holder] -->    {<!-- [et_pb_line_break_holder] -->      \"@type\": \"Question\",<!-- [et_pb_line_break_holder] -->      \"name\": \"Can I avoid capital gains tax on my investment property in Canada?\",<!-- [et_pb_line_break_holder] -->      \"acceptedAnswer\": {<!-- [et_pb_line_break_holder] -->        \"@type\": \"Answer\",<!-- [et_pb_line_break_holder] -->        \"text\": \"You may be able to reduce or avoid capital gains tax by using strategies such as claiming the principal residence exemption, transferring the property to a spouse, or donating the property to a registered charity.\"<!-- [et_pb_line_break_holder] -->      }<!-- [et_pb_line_break_holder] -->    },<!-- [et_pb_line_break_holder] -->    {<!-- [et_pb_line_break_holder] -->      \"@type\": \"Question\",<!-- [et_pb_line_break_holder] -->      \"name\": \"What is the principal residence exemption?\",<!-- [et_pb_line_break_holder] -->      \"acceptedAnswer\": {<!-- [et_pb_line_break_holder] -->        \"@type\": \"Answer\",<!-- [et_pb_line_break_holder] -->        \"text\": \"The principal residence exemption allows homeowners to avoid paying capital gains tax on the sale of a property designated as their primary home for every year it was owned and occupied as such.\"<!-- [et_pb_line_break_holder] -->      }<!-- [et_pb_line_break_holder] -->    },<!-- [et_pb_line_break_holder] -->    {<!-- [et_pb_line_break_holder] -->      \"@type\": \"Question\",<!-- [et_pb_line_break_holder] -->      \"name\": \"Can I gift an investment property to a family member to avoid capital gains?\",<!-- [et_pb_line_break_holder] -->      \"acceptedAnswer\": {<!-- [et_pb_line_break_holder] -->        \"@type\": \"Answer\",<!-- [et_pb_line_break_holder] -->        \"text\": \"Gifting an investment property is still considered a disposition by the CRA and may trigger capital gains tax. However, spouses can transfer properties at cost for deferral, though gains may be taxed upon future sale.\"<!-- [et_pb_line_break_holder] -->      }<!-- [et_pb_line_break_holder] -->    },<!-- [et_pb_line_break_holder] -->    {<!-- [et_pb_line_break_holder] -->      \"@type\": \"Question\",<!-- [et_pb_line_break_holder] -->      \"name\": \"Does donating a property reduce capital gains tax?\",<!-- [et_pb_line_break_holder] -->      \"acceptedAnswer\": {<!-- [et_pb_line_break_holder] -->        \"@type\": \"Answer\",<!-- [et_pb_line_break_holder] -->        \"text\": \"Yes, donating real estate to a registered charity may qualify for a tax credit and potentially eliminate the capital gains tax if certain conditions are met under Canadian tax law.\"<!-- [et_pb_line_break_holder] -->      }<!-- [et_pb_line_break_holder] -->    }<!-- [et_pb_line_break_holder] -->  ]<!-- [et_pb_line_break_holder] -->}<!-- [et_pb_line_break_holder] --><\/script><!-- [et_pb_line_break_holder] -->[\/et_pb_code][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=&#8221;1&#8243; _builder_version=&#8221;4.24.2&#8243; _module_preset=&#8221;default&#8221; min_height=&#8221;35px&#8221; custom_padding=&#8221;0px||0px||true|false&#8221; da_disable_devices=&#8221;off|off|off&#8221; global_module=&#8221;1002&#8243; saved_tabs=&#8221;all&#8221; locked=&#8221;off&#8221; global_colors_info=&#8221;{}&#8221; da_is_popup=&#8221;off&#8221; da_exit_intent=&#8221;off&#8221; da_has_close=&#8221;on&#8221; da_alt_close=&#8221;off&#8221; da_dark_close=&#8221;off&#8221; da_not_modal=&#8221;on&#8221; da_is_singular=&#8221;off&#8221; da_with_loader=&#8221;off&#8221; da_has_shadow=&#8221;on&#8221;][\/et_pb_section][et_pb_section fb_built=&#8221;1&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; custom_padding=&#8221;54px||48px|||&#8221; da_disable_devices=&#8221;off|off|off&#8221; global_colors_info=&#8221;{}&#8221; da_is_popup=&#8221;off&#8221; da_exit_intent=&#8221;off&#8221; da_has_close=&#8221;on&#8221; da_alt_close=&#8221;off&#8221; da_dark_close=&#8221;off&#8221; da_not_modal=&#8221;on&#8221; da_is_singular=&#8221;off&#8221; da_with_loader=&#8221;off&#8221; da_has_shadow=&#8221;on&#8221;][et_pb_row _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_text _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; text_font_size=&#8221;21px&#8221; text_line_height=&#8221;1.6em&#8221; header_2_font=&#8221;||||||||&#8221; header_2_font_size=&#8221;36px&#8221; header_2_line_height=&#8221;1.3em&#8221; header_3_font_size=&#8221;1.25rem&#8221; header_3_line_height=&#8221;1.88rem&#8221; header_4_font=&#8221;|700|||||||&#8221; header_4_font_size=&#8221;1.25rem&#8221; header_4_line_height=&#8221;1.88rem&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<h2 class=\"p1\">Eight Tips to Avoid Capital Gains Tax in Canada<\/h2>\n<p class=\"p3\">As a real estate investor, it might be impossible to avoid paying capital gains tax in Canada. That said, there are ways to minimize how much you pay or defer payments. The experts at Wahi have put together a list of tips to help you pay less capital gains tax when selling an investment property in Canada.\u00a0<\/p>\n<p class=\"p3\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<h3 class=\"p4\"><b>1. Sell your investment property when your income is at its lowest<\/b><\/h3>\n<p class=\"p3\">Since the amount of capital gains tax owed is dependent on your tax bracket (and the corresponding tax rates in your province or territory), one trick to paying less tax is by selling your property when your income is at its lowest. By doing this, your capital gains tax rate will also be lower, which translates to more money in your pocket. Not everyone\u2019s income will fluctuate, but if you or your partner are on parental leave or taking a leave of absence from work, selling your investment property during this time could minimize how much capital gains tax you are required to pay.\u00a0<\/p>\n<p class=\"p3\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<h3 class=\"p4\"><b>2. Offset capital gains with capital losses<\/b><\/h3>\n<p class=\"p3\">As mentioned above, the CRA allows taxpayers to offset their capital gains with their capital losses. So if you recently suffered a capital loss, whether a previous investment property, stock, or bond sold for less than you purchased it for, you could use these capital losses to your advantage. As with a capital gain, a capital loss is only realized once the asset has been sold. Therefore, if you decide against selling your investment property because you know it will be sold at a loss, your capital loss is unrealized and cannot be used to offset a capital gain. It\u2019s worth noting that investors can apply their capital losses to any capital gains made in the past three years. Meaning if you don\u2019t have any capital gains to offset in the same year you had a capital loss, you can wait and retroactively apply your capital loss to a future capital gain as long as the loss occurred in the three years prior.\u00a0<\/p>\n<p class=\"p3\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<h3 class=\"p4\"><b>3. Donate your investment property to charity<\/b><\/h3>\n<p class=\"p3\">Another tip for reducing how much capital gains tax you pay in Canada is to donate your property to charity. Donating your investment property to a registered charity of your choice is a quick way of reducing your capital gains tax. If the property you donate results in a capital gain, you won\u2019t have to pay any capital gains tax. Instead, you will benefit from a significant tax deduction.\u00a0<\/p>\n<p class=\"p3\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<h3 class=\"p4\"><b>4. Track all expenses associated with your investment property<\/b><\/h3>\n<p class=\"p3\">Tracking all expenses associated with your investment property is another way to ensure you never pay more capital gains tax than you have to. Since certain expenses, such as legal fees, are considered part of your adjusted base cost and therefore used to calculate how much you owe, maintaining a record of all spending can help minimize how much capital gains tax you owe. Examples include retaining copies of receipts and invoices for legal fees, property taxes paid, and home improvements or renovations, such as landscaping, new window treatments, new garages or driveways, and HVAC installations. These are all examples of expenses that can impact your capital gains tax.\u00a0<\/p>\n<p>[\/et_pb_text][\/et_pb_column][\/et_pb_row][\/et_pb_section][et_pb_section fb_built=&#8221;1&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; background_color=&#8221;#f0faf4&#8243; min_height=&#8221;334.8px&#8221; custom_padding=&#8221;3px||0px|||&#8221; da_disable_devices=&#8221;off|off|off&#8221; global_module=&#8221;849&#8243; saved_tabs=&#8221;all&#8221; locked=&#8221;off&#8221; global_colors_info=&#8221;{}&#8221; da_is_popup=&#8221;off&#8221; da_exit_intent=&#8221;off&#8221; da_has_close=&#8221;on&#8221; da_alt_close=&#8221;off&#8221; da_dark_close=&#8221;off&#8221; da_not_modal=&#8221;on&#8221; da_is_singular=&#8221;off&#8221; da_with_loader=&#8221;off&#8221; da_has_shadow=&#8221;on&#8221;][et_pb_row _builder_version=&#8221;4.20.2&#8243; _module_preset=&#8221;default&#8221; height=&#8221;1px&#8221; custom_padding=&#8221;0px||0px||false|false&#8221; locked=&#8221;off&#8221; 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global_colors_info=&#8221;{}&#8221; da_is_popup=&#8221;off&#8221; da_exit_intent=&#8221;off&#8221; da_has_close=&#8221;on&#8221; da_alt_close=&#8221;off&#8221; da_dark_close=&#8221;off&#8221; da_not_modal=&#8221;on&#8221; da_is_singular=&#8221;off&#8221; da_with_loader=&#8221;off&#8221; da_has_shadow=&#8221;on&#8221;][et_pb_row _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_text _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; text_font_size=&#8221;21px&#8221; text_line_height=&#8221;1.6em&#8221; header_2_font=&#8221;||||||||&#8221; header_2_font_size=&#8221;36px&#8221; header_2_line_height=&#8221;1.3em&#8221; header_3_font_size=&#8221;1.25rem&#8221; header_3_line_height=&#8221;1.88rem&#8221; header_4_font=&#8221;|700|||||||&#8221; header_4_font_size=&#8221;1.25rem&#8221; header_4_line_height=&#8221;1.88rem&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<h3 class=\"p1\"><b>5. Hold property investments in tax-advantaged accounts<\/b><\/h3>\n<p class=\"p3\">Did you know that holding your real estate investment in tax-advantaged accounts can help you reduce or even defer capital gains tax? That\u2019s right, and there are several tax-advantaged accounts available to Canadians. For example, if you hold an investment in a Tax-Free Savings Account (TFSA), you will not have to declare or pay tax on any gains you earn from this investment (that said, there is a strict contribution limit to TFSAs). Meanwhile, holding an investment in a Registered Retirement Savings Plan (RRSP) may allow you to defer the capital gains tax owed on a property sale.<\/p>\n<p class=\"p3\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<h3 class=\"p1\"><b>6. Take advantage of the lifetime capital gain exemption<\/b><\/h3>\n<p class=\"p3\">Depending on the type of investment property you purchase, you may be eligible for a lifetime capital gain exemption. For example, Canada\u2019s lifetime capital gains exemption typically applies to farm and fishing properties. Please note that the lifetime exemption is usually capped at around $1 million, though it can change annually. In 2022, the exemption is capped at $913,630.\u00a0<\/p>\n<p class=\"p3\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<h3 class=\"p1\"><b>7. Use capital gain reserve to spread out payments<\/b><\/h3>\n<p class=\"p3\">Spreading the proceeds of a capital property over five or 10 years can have serious advantages when it comes to capital gains tax. All Canadian provinces and territories utilize a progressive tax system, meaning that the more money we make, the more our tax rates increase. Therefore, if you were to sell your investment property and add your entire capital gain to your income tax return at once, your tax rate will be higher. However, if you can spread the gain out over five years, your tax rate will likely be lower, meaning more money stays with you. The risk with using this method is that the buyer of your investment property must agree to spread out these payments. Of course, they must also hold up their end of the deal by making a payment each year over five years. Therefore, there is a risk that the buyer could default on their promise. Further, if you invested in a certain kind of property, such as a farm, you might be able to spread out your capital gain over a period of 10 years, if the property was sold to a family member, such as a child or grandchild.\u00a0<\/p>\n<p class=\"p3\"><span style=\"color: #ffffff;\">\u00a0&#8211;<\/span><\/p>\n<h3 class=\"p1\"><b>8. Consult with a tax professional<\/b><\/h3>\n<p class=\"p3\">Ultimately, the best way to ensure you never spend more than you have to on capital gains tax (while complying with the law) is by working with a tax professional. Tax attorneys and professional accountants can help you avoid paying capital gains tax in Canada legally. They can offer objective, unbiased advice on when and how to sell your investment property while keeping tax payments to a minimum.\u00a0<\/p>\n<p>[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; custom_padding=&#8221;||9px|||&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_text module_class=&#8221;BaseTitle&#8221; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; header_2_font=&#8221;||||||||&#8221; header_2_font_size=&#8221;2rem&#8221; header_2_line_height=&#8221;2.5rem&#8221; header_2_font_size_tablet=&#8221;2rem&#8221; header_2_font_size_phone=&#8221;1.5rem&#8221; header_2_font_size_last_edited=&#8221;on|phone&#8221; header_2_line_height_tablet=&#8221;2.5rem&#8221; header_2_line_height_phone=&#8221;2.25rem&#8221; header_2_line_height_last_edited=&#8221;on|desktop&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<h2>Frequently Asked Questions<\/h2>\n<p>[\/et_pb_text][et_pb_toggle title=&#8221;What triggers capital gains tax in Canada?&#8221; closed_toggle_background_color=&#8221;#ffffff&#8221; icon_color=&#8221;#BC4E40&#8243; toggle_icon=&#8221;&#x43;||divi||400&#8243; use_icon_font_size=&#8221;on&#8221; icon_font_size=&#8221;32px&#8221; open_icon_color=&#8221;#BC4E40&#8243; open_toggle_icon=&#8221;&#x42;||divi||400&#8243; open_use_icon_font_size=&#8221;on&#8221; open_icon_font_size=&#8221;32px&#8221; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; title_text_color=&#8221;#000000&#8243; title_level=&#8221;h2&#8243; title_font=&#8221;|700|||||||&#8221; body_text_color=&#8221;#686e6e&#8221; body_line_height=&#8221;2em&#8221; custom_margin=&#8221;||3px|||&#8221; custom_padding=&#8221;||17px|||&#8221; border_width_all=&#8221;0px&#8221; border_width_top=&#8221;1px&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<p><span>If you earn a profit after selling an investment in Canada, such as an investment property, you may be required to pay capital gains tax. Please note that capital gains tax is only owed once the asset is realized (that is, once the property has been sold).\u00a0<\/span><\/p>\n<p>[\/et_pb_toggle][et_pb_toggle title=&#8221;How does capital gains tax work in Canada?&#8221; closed_toggle_background_color=&#8221;#ffffff&#8221; icon_color=&#8221;#BC4E40&#8243; toggle_icon=&#8221;&#x43;||divi||400&#8243; use_icon_font_size=&#8221;on&#8221; icon_font_size=&#8221;32px&#8221; open_icon_color=&#8221;#BC4E40&#8243; open_toggle_icon=&#8221;&#x42;||divi||400&#8243; open_use_icon_font_size=&#8221;on&#8221; open_icon_font_size=&#8221;32px&#8221; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; title_text_color=&#8221;#000000&#8243; title_level=&#8221;h2&#8243; title_font=&#8221;|700|||||||&#8221; title_line_height=&#8221;1.3em&#8221; body_text_color=&#8221;#686e6e&#8221; body_line_height=&#8221;2em&#8221; custom_margin=&#8221;||3px|||&#8221; custom_padding=&#8221;||17px|||&#8221; border_width_all=&#8221;0px&#8221; border_width_top=&#8221;1px&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<p>Capital gains tax is a tax that must be paid when capital assets are sold in Canada if they are sold at a profit. More specifically, if you earn a capital gain, you may be required to pay tax on 50% of your realized capital gain. In essence, half the profit you earn from the sale of your investment is taxable, while the other half is yours to keep.\u00a0<\/p>\n<p>[\/et_pb_toggle][et_pb_toggle title=&#8221;How is the capital gains tax calculated in Canada?&#8221; closed_toggle_background_color=&#8221;#ffffff&#8221; icon_color=&#8221;#BC4E40&#8243; toggle_icon=&#8221;&#x43;||divi||400&#8243; use_icon_font_size=&#8221;on&#8221; icon_font_size=&#8221;32px&#8221; open_icon_color=&#8221;#BC4E40&#8243; open_toggle_icon=&#8221;&#x42;||divi||400&#8243; open_use_icon_font_size=&#8221;on&#8221; open_icon_font_size=&#8221;32px&#8221; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; title_text_color=&#8221;#000000&#8243; title_level=&#8221;h2&#8243; title_font=&#8221;|700|||||||&#8221; title_line_height=&#8221;1.3em&#8221; body_text_color=&#8221;#686e6e&#8221; body_line_height=&#8221;2em&#8221; custom_margin=&#8221;||3px|||&#8221; custom_padding=&#8221;||17px|||&#8221; border_width_all=&#8221;0px&#8221; border_width_top=&#8221;1px&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<p><span>To calculate capital gains tax on a property sale in Canada, you must subtract the adjusted base cost (ABC) of the property from the sale price. Then, divide that number in half and the amount you have left is the amount subject to capital gains tax in Canada. The exact amount of money owed as capital gains varies significantly as it is dependent on several factors, including which province or territory you reside in, your income tax bracket, and the profit realized.\u00a0<\/span><\/p>\n<p>[\/et_pb_toggle][et_pb_toggle title=&#8221;When do I report a capital gain or loss?&#8221; closed_toggle_background_color=&#8221;#ffffff&#8221; icon_color=&#8221;#BC4E40&#8243; toggle_icon=&#8221;&#x43;||divi||400&#8243; use_icon_font_size=&#8221;on&#8221; icon_font_size=&#8221;32px&#8221; open_icon_color=&#8221;#BC4E40&#8243; open_toggle_icon=&#8221;&#x42;||divi||400&#8243; open_use_icon_font_size=&#8221;on&#8221; open_icon_font_size=&#8221;32px&#8221; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; title_text_color=&#8221;#000000&#8243; title_level=&#8221;h2&#8243; title_font=&#8221;|700|||||||&#8221; title_line_height=&#8221;1.3em&#8221; body_text_color=&#8221;#686e6e&#8221; body_line_height=&#8221;2em&#8221; custom_margin=&#8221;||3px|||&#8221; custom_padding=&#8221;||17px|||&#8221; border_width_all=&#8221;0px&#8221; border_width_top=&#8221;1px&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<p><span>You must report a capital gain or loss in the calendar year you sell, or are considered to have sold, the property. No matter if the property sale resulted in a capital gain or loss, you must still include the relevant information on your income tax return.\u00a0<\/span><\/p>\n<p>[\/et_pb_toggle][et_pb_toggle title=&#8221;How can I reduce capital gains tax on a property sale?&#8221; closed_toggle_background_color=&#8221;#ffffff&#8221; icon_color=&#8221;#BC4E40&#8243; toggle_icon=&#8221;&#x43;||divi||400&#8243; use_icon_font_size=&#8221;on&#8221; icon_font_size=&#8221;32px&#8221; open_icon_color=&#8221;#BC4E40&#8243; open_toggle_icon=&#8221;&#x42;||divi||400&#8243; open_use_icon_font_size=&#8221;on&#8221; open_icon_font_size=&#8221;32px&#8221; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; title_text_color=&#8221;#000000&#8243; title_level=&#8221;h2&#8243; title_font=&#8221;|700|||||||&#8221; title_line_height=&#8221;1.3em&#8221; body_text_color=&#8221;#686e6e&#8221; body_line_height=&#8221;2em&#8221; custom_margin=&#8221;||3px|||&#8221; custom_padding=&#8221;||17px|||&#8221; border_width_all=&#8221;0px&#8221; border_width_top=&#8221;1px&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<p><span>There are many ways to reduce capital gains tax on a property sale. For example, you can wait to sell your investment property until your income is at its lowest (for example, if you have a reduced salary due to parental leave or are taking a sabbatical from work), you can offset your capital gain with capital losses from the past three years, or you can donate your investment property to a registered charity in Canada. Other ways to minimize how much capital gains tax you pay include holding investments in tax-advantaged accounts like RRSPs or TFSAs, closely tracking all expenses associated with the property (legal fees, renovations, and more), taking advantage of the lifetime capital gains exemption, using capital gains reserve, and consulting with an experienced tax professional. Of course, you might also be able to avoid capital gains tax altogether by making the property your primary residence or purchasing a qualifying farming or fishing property.<\/span><\/p>\n<p>[\/et_pb_toggle][et_pb_toggle title=&#8221;Does capital gains tax apply only to real estate?&#8221; closed_toggle_background_color=&#8221;#ffffff&#8221; icon_color=&#8221;#BC4E40&#8243; toggle_icon=&#8221;&#x43;||divi||400&#8243; use_icon_font_size=&#8221;on&#8221; icon_font_size=&#8221;32px&#8221; open_icon_color=&#8221;#BC4E40&#8243; open_toggle_icon=&#8221;&#x42;||divi||400&#8243; open_use_icon_font_size=&#8221;on&#8221; open_icon_font_size=&#8221;32px&#8221; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; title_text_color=&#8221;#000000&#8243; title_level=&#8221;h2&#8243; title_font=&#8221;|700|||||||&#8221; title_line_height=&#8221;1.3em&#8221; body_text_color=&#8221;#686e6e&#8221; body_line_height=&#8221;2em&#8221; custom_margin=&#8221;||3px|||&#8221; custom_padding=&#8221;||17px|||&#8221; border_width_all=&#8221;0px&#8221; border_width_top=&#8221;1px&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<p><span>No, capital gains taxes in Canada apply to all types of capital assets. While capital assets do include real estate, they also include stocks, bonds, and more.\u00a0<\/span><\/p>\n<p>[\/et_pb_toggle][et_pb_toggle title=&#8221;Can I avoid paying capital gains tax when I sell a property in Canada?&#8221; closed_toggle_background_color=&#8221;#ffffff&#8221; icon_color=&#8221;#BC4E40&#8243; toggle_icon=&#8221;&#x43;||divi||400&#8243; use_icon_font_size=&#8221;on&#8221; icon_font_size=&#8221;32px&#8221; open_icon_color=&#8221;#BC4E40&#8243; open_toggle_icon=&#8221;&#x42;||divi||400&#8243; open_use_icon_font_size=&#8221;on&#8221; open_icon_font_size=&#8221;32px&#8221; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; title_text_color=&#8221;#000000&#8243; title_level=&#8221;h2&#8243; title_font=&#8221;|700|||||||&#8221; body_text_color=&#8221;#686e6e&#8221; body_line_height=&#8221;2em&#8221; custom_margin=&#8221;||3px|||&#8221; custom_padding=&#8221;||17px|||&#8221; border_width_all=&#8221;0px&#8221; border_width_top=&#8221;1px&#8221; border_width_bottom=&#8221;1px&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<p>Some real estate investors may be able to avoid paying capital gains tax in Canada. The only legal way to avoid paying capital gains is by qualifying for one of two exemptions. The two exemptions are the primary residence exemption and the sale of farm or fishing properties exemption. The CRA defines a principal residence as follows:<\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li>\n<p>It is a housing unit, a leasehold interest in a housing unit, or a share of the capital stock of a co-operative housing corporation you acquire only to get the right to inhabit a housing unit owned by that corporation;<\/p>\n<\/li>\n<li>\n<p>You own the property alone or jointly with another person;<\/p>\n<\/li>\n<li>\n<p>You, your current or former spouse, your common-law partner, or any of your children lived in it at some time during the year; and<\/p>\n<\/li>\n<li>\n<p>You designate the property as your principal residence.<\/p>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>Please note that your property is required to meet all four of the conditions listed above to be considered a principal residence. It\u2019s also worth noting that according to the CRA, a principal residence can be any of the following types of properties: house, cottage, condominium, apartment, duplex, trailer, mobile home, or houseboat.<\/p>\n<p>Meanwhile, the CRA defines a farm or fishing property as follows:<\/p>\n<ul>\n<li>\n<p>Shares of the capital stock of a family farm or fishing corporation owned by you, your spouse, or your common-law partner;<\/p>\n<\/li>\n<li>\n<p>An interest in a family farm or fishing partnership owned by you, your spouse, or your common-law partner;<\/p>\n<\/li>\n<li>\n<p>Real property including land, buildings, and fishing vessels; and<\/p>\n<\/li>\n<li>\n<p>Property included in capital cost allowance Class 14.1, such as milk and egg quotas, or fishing licences.<\/p>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>If you do not qualify for either exemption, such as if you purchased an investment property for rental income, you will need to pay capital gains tax on any profit realized upon selling.<\/p>\n<p>[\/et_pb_toggle][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; custom_padding=&#8221;48px||48px||true|false&#8221; global_module=&#8221;2651&#8243; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_blurb title=&#8221;Emily Southey&#8221; image=&#8221;https:\/\/wahi.com\/wp-content\/uploads\/2022\/11\/Screen-Shot-2022-11-02-at-7.46.57-PM.png&#8221; icon_placement=&#8221;left&#8221; _builder_version=&#8221;4.24.2&#8243; _module_preset=&#8221;default&#8221; header_font_size=&#8221;24px&#8221; header_line_height=&#8221;1.2em&#8221; body_text_color=&#8221;#686E6E&#8221; body_line_height=&#8221;0em&#8221; width=&#8221;550px&#8221; max_width_tablet=&#8221;&#8221; max_width_phone=&#8221;&#8221; max_width_last_edited=&#8221;on|phone&#8221; module_alignment=&#8221;left&#8221; custom_padding=&#8221;2px||13px|||&#8221; header_font_size_tablet=&#8221;24px&#8221; header_font_size_phone=&#8221;20px&#8221; header_font_size_last_edited=&#8221;on|phone&#8221; header_line_height_tablet=&#8221;1.2em&#8221; header_line_height_phone=&#8221;1.4em&#8221; header_line_height_last_edited=&#8221;on|phone&#8221; custom_css_blurb_image=&#8221;width:64px;&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<p>Wahi Writer<\/p>\n<p>[\/et_pb_blurb][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; custom_padding=&#8221;0px||0px||true|false&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][wahi_socialsharing module_class=&#8221;wahi_socialsharing_2&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/wahi_socialsharing][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; custom_padding=&#8221;60px||3px||false|false&#8221; global_module=&#8221;2970&#8243; saved_tabs=&#8221;all&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_text _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; header_2_font_size=&#8221;2.63rem&#8221; header_2_line_height=&#8221;2.5rem&#8221; header_2_font_size_tablet=&#8221;&#8221; header_2_font_size_phone=&#8221;2rem&#8221; header_2_font_size_last_edited=&#8221;on|phone&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<h2>You might also like<\/h2>\n<p>[\/et_pb_text][et_pb_blog_extras posts_number=&#8221;3&#8243; include_categories=&#8221;129&#8243; blog_layout=&#8221;masonry&#8221; meta_date=&#8221;M j&#8221; excerpt_length=&#8221;0&#8243; show_more=&#8221;off&#8221; show_author=&#8221;off&#8221; category_color=&#8221;#686E6E&#8221; show_comments=&#8221;off&#8221; module_class=&#8221;zoom-blog&#8221; masonry_columns_tablet=&#8221;&#8221; masonry_columns_phone=&#8221;1&#8243; masonry_columns_last_edited=&#8221;on|phone&#8221; _builder_version=&#8221;4.18.0&#8243; _module_preset=&#8221;default&#8221; filterable_category_font_size=&#8221;20px&#8221; active_filterable_category_font_size=&#8221;20px&#8221; header_font=&#8221;Lato||||||||&#8221; header_font_size=&#8221;1.25rem&#8221; header_line_height=&#8221;1.88rem&#8221; meta_text_color=&#8221;#686E6E&#8221; meta_font_size=&#8221;16px&#8221; custom_css_title=&#8221;font-weight:900!important;&#8221; custom_css_post_meta=&#8221;margin-top:-32px!important;&#8221; global_colors_info=&#8221;{}&#8221; custom_css_title__hover_enabled=&#8221;on|desktop&#8221; custom_css_title__hover=&#8221;font-weight:900!important; text-decoration:underline;&#8221;][\/et_pb_blog_extras][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":"<p><div class=\"et_pb_module wahi_breadcrumb wahi_breadcrumb_0\">\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t<div class=\"et_pb_module_inner\">\n\t\t\t\t\t\n\t\t\t<ul class='wahi_breadcrumb__list'> <div class=\"et_pb_module wahi_breadcrumb-link wahi_breadcrumb-link_0\">\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t<div class=\"et_pb_module_inner\">\n\t\t\t\t\t\n\t\t\t<svg width='18' height='18' viewBox='0 0 18 18' fill='none' class='wahi_breadcrumb-link__chevron--mobile' aria-hidden='true'>\n\t\t\t\t<path d='M5.05261 16.7143L12.6316 9.00005L5.05261 1.28577' stroke='currentColor' stroke-width='1.5' stroke-linecap='round' stroke-linejoin='round'><\/path>\n\t\t\t<\/svg>\n\t\t\t<li class='wahi_breadcrumb-link__list-item'>\n\t\t\t\t<a\n\t\t\t\t\tclass='wahi_breadcrumb-link__link'\n\t\t\t\t\thref='' \n\t\t\t\t\ttarget='_self'\n\t\t\t\t>\n\t\t\t\t\tReal Estate 101\n\t\t\t\t<\/a>\n\n\t\t\t\t\n\t\t\t<\/li>\n\t\t\t<svg width='18' height='18' viewBox='0 0 18 18' fill='none' class='' aria-hidden='true'>\n\t\t\t\t<path d='M5.05261 16.7143L12.6316 9.00005L5.05261 1.28577' stroke='currentColor' stroke-width='1.5' stroke-linecap='round' stroke-linejoin='round'><\/path>\n\t\t\t<\/svg>\n\t\n\t\t\t\t<\/div>\n\t\t\t<\/div><div class=\"et_pb_module wahi_breadcrumb-link wahi_breadcrumb-link_1\">\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t<div class=\"et_pb_module_inner\">\n\t\t\t\t\t\n\t\t\t<svg width='18' height='18' viewBox='0 0 18 18' fill='none' class='wahi_breadcrumb-link__chevron--mobile' aria-hidden='true'>\n\t\t\t\t<path d='M5.05261 16.7143L12.6316 9.00005L5.05261 1.28577' stroke='currentColor' stroke-width='1.5' stroke-linecap='round' stroke-linejoin='round'><\/path>\n\t\t\t<\/svg>\n\t\t\t<li class='wahi_breadcrumb-link__list-item'>\n\t\t\t\t<a\n\t\t\t\t\tclass='wahi_breadcrumb-link__link'\n\t\t\t\t\thref='' \n\t\t\t\t\ttarget='_self'\n\t\t\t\t>\n\t\t\t\t\tInvest\n\t\t\t\t<\/a>\n\n\t\t\t\t\n\t\t\t<\/li>\n\t\t\t<svg width='18' height='18' viewBox='0 0 18 18' fill='none' class='' aria-hidden='true'>\n\t\t\t\t<path d='M5.05261 16.7143L12.6316 9.00005L5.05261 1.28577' stroke='currentColor' stroke-width='1.5' stroke-linecap='round' stroke-linejoin='round'><\/path>\n\t\t\t<\/svg>\n\t\n\t\t\t\t<\/div>\n\t\t\t<\/div><div class=\"et_pb_module wahi_breadcrumb-link wahi_breadcrumb-link_2\">\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t<div class=\"et_pb_module_inner\">\n\t\t\t\t\t\n\t\t\t<svg width='18' height='18' viewBox='0 0 18 18' fill='none' class='wahi_breadcrumb-link__chevron--mobile' aria-hidden='true'>\n\t\t\t\t<path d='M5.05261 16.7143L12.6316 9.00005L5.05261 1.28577' stroke='currentColor' stroke-width='1.5' stroke-linecap='round' stroke-linejoin='round'><\/path>\n\t\t\t<\/svg>\n\t\t\t<li class='wahi_breadcrumb-link__list-item'>\n\t\t\t\t<a\n\t\t\t\t\tclass='wahi_breadcrumb-link__link'\n\t\t\t\t\thref='' \n\t\t\t\t\ttarget='_self'\n\t\t\t\t>\n\t\t\t\t\t\n\t\t\t\t<\/a>\n\n\t\t\t\t\n\t\t\t<\/li>\n\t\t\t<svg width='18' height='18' viewBox='0 0 18 18' fill='none' class='' aria-hidden='true'>\n\t\t\t\t<path d='M5.05261 16.7143L12.6316 9.00005L5.05261 1.28577' stroke='currentColor' stroke-width='1.5' stroke-linecap='round' stroke-linejoin='round'><\/path>\n\t\t\t<\/svg>\n\t\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t<\/ul>\n\t\t\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n      <div class='wahi_socialsharing'> \n\t\t \t\t<div class='wahi_socialsharing__linkContainer'>\n          \n        <a class='wahi_socialsharing__link' href='https:\/\/twitter.com\/intent\/tweet?url='>\n          <img class='wahi_socialsharing__logo lazyload' data-src='https:\/\/wahi.com\/wp-content\/themes\/divi-child\/assets\/twitter.svg' src='data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==' \/>\n        <\/a>\n      \n        <a class='wahi_socialsharing__link' href='https:\/\/www.facebook.com\/sharer\/sharer.php?u='>\n          <img class='wahi_socialsharing__logo lazyload' data-src='https:\/\/wahi.com\/wp-content\/themes\/divi-child\/assets\/facebook.svg' src='data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==' \/>\n        <\/a>\n      \n        <a class='wahi_socialsharing__link' href='https:\/\/www.linkedin.com\/sharing\/share-offsite\/?url='>\n          <img class='wahi_socialsharing__logo lazyload' data-src='https:\/\/wahi.com\/wp-content\/themes\/divi-child\/assets\/linkedin.svg' src='data:image\/gif;base64,R0lGODlhAQABAAAAACH5BAEKAAEALAAAAAABAAEAAAICTAEAOw==' \/>\n        <\/a>\n      \n        <\/div>\n      <\/div>\n     Before purchasing an investment property, be sure to understand how capital gains tax works and the ways in which you may be able to reduce the amount you 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