Capital gains and losses, and capital gains exemptions

Region: Ontario Answer # 171

What is a capital gain?

Generally, if you sell capital property, such as stocks on the stock market, for more than you paid, the amount of the difference is considered a capital gain. If you sell something for less than you paid, the amount of the loss is considered a capital loss. Personal and business tax issues are vast and complicated. To get help, ask a lawyer now.

What percentage of the gain is taxed?

As of June 25, 2024, an individual taxpayer must pay tax on 50% of the first $250,000 of the capital gain. For every dollar above $250,000, two-thirds (67%) would be taxable. If you have capital losses, 50% of the loss can be subtracted from the first $250,000 of capital gains you made, and two-thirds from every dollar above $250,000. For corporations and most types of trusts, two-thirds of ALL capital gains will be taxed. Visit Canada.ca for more information.

Capital losses can be carried back or carried forward. In some cases, capital gains can also be paid in a year other than the year in which they were earned. This is possible if you do not receive all of the proceeds of the sale right away. In such cases, you would claim a capital gains reserve, and pay only a portion of the tax each year. Reserves only can be claimed for a period up-to five years, which means that all tax owing must be paid by the fifth year.

Exemptions from capital gains tax

1. Property that is exempt

Principal residence: Some types of property are exempt from being taxed for capital gains. The most common capital gain exemption is the sale of your principal residence. A principal residence is the home where you ordinarily live or where your spouse, former spouse, or child ordinarily lives.

Although capital gains on the sale of a principal residence are not taxable, as of October 2016, Canada Revenue Agency requires that the seller report the sale in order to claim the exemption. You will be required to report information such as: the date of purchase, the date of sale, the selling price, and a description of the property.

Other types of property:  Capital gains from the sale of business inventory, land bought with the intention of making a profit on its resale, and profit made on the sale of personal-use property whose cost and selling price were both less than $1,000 are some examples that fall under the capital gains exemption.


2. Lifetime capital gains exemption

The lifetime capital gains exemption (LCGE) allows people to realize tax-free capital gains, if the property disposed of qualifies.

The lifetime capital gains exemption for qualified farm or fishing property and qualified small business corporation shares is $1,016,836 in 2024, up from $971,190 in 2023.

Small business corporation shares qualify under this exemption when:

1. Throughout the 24 months immediately preceding the disposition of the shares:

  • the shares have been owned by you or a person or partnership related to you, and
  • more than 50% of the fair market value of the assets of the corporation were used in an active business, carried on primarily in Canada, and

2. At the time of the disposition of the shares “all or substantially all” (at least 90%) of the assets of the corporation were used to carry on active business.

You will need to determine your total capital gains and losses before filing your tax return. When you sell stocks or other investments through a broker, you will usually receive a receipt for tax return purposes that lists your capital gain or loss.

For more information, visit Canada Revenue Agency.

Get help

For advice and assistance with tax planning, a CRA tax dispute, or other tax issues, contact Tax Chambers LLP

Personal and business tax issues are vast and complicated. To get help, ask a lawyer now.

Tax Chambers Tax Law Ontario All Topics Sept 2017Tax Chambers Tax Law Ontario All Topics Sept 2017



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