How to calculate the tax payable on the sale of rental property

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Many investors do not know how to calculate capital gain tax on property sales. Others make the mistake of estimating taxes based on cash flow.
In today's video, I’ll show you how to calculate capital gain tax with examples, so you can avoid paying unnecessary taxes on property sales.
If you have any questions or thoughts after watching this video, leave a comment below, and I’ll respond as soon as possible.
#RealEstateTaxTips #RealEstateInvestors #CanadianInvesting #realestateinvesting #capitagaintax #recapturetax #taxman #rentalpropertysales
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DISCLAIMER:
Tax planning is a personalized decision and will depend on your situation, priorities, and risk tolerance. Consult with your own legal and tax advisors to ensure you get the advice you personalized for you.
The information contained in this video is for general information purposes only.
The information is provided by ECRB Consulting Inc., RealEstateTaxTips.ca, Cherry Chan Professional Corporation and Cherry Chan.
While we endeavour to keep the information up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability to the article or the information, products, services, or related graphics contained on the presentation for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
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Опубликовано:

24 ноя 2021

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Комментарии : 75

@boriskofman7852 2 года назад

Very clear and informative. Thank you very much!

@billchong2089 2 года назад

Excellent presentation. You make it easy and simple to understand. Thanks.

@RealEstateTaxTips 2 года назад

Thank you.

@zhenguangliu6296 2 года назад

Perfect video presentation. You made it clear and easy to understand, very helpful. Thank you.

@RealEstateTaxTips 2 года назад

You're very welcome!

@Qa9cLj0t6 9 месяцев назад

Thank you so much! I feel so educated now!

@RealEstateTaxTips 9 месяцев назад

Glad you found it helpful!

@TahirGilani 2 года назад

fantastic and comprehensive explanation!!!! wonderful job

@RealEstateTaxTips 2 года назад

Glad you liked it!

@shansiva9256 2 года назад

Very valuable information. Appreciated your effort to inform in details

@RealEstateTaxTips 2 года назад

Glad it was helpful!

@Jeff-if4id 2 года назад

Great explanation of a complex subject!

@RealEstateTaxTips 2 года назад

Thank you!

@annaperry1471 2 года назад

Magically ‼this 🙏🏼🖤

@RealEstateTaxTips 2 года назад

Glad you like it.

@raxapatel757 2 года назад

Great work 👏 👍 👌

@RealEstateTaxTips 2 года назад

Thanks a lot 😊

@darshanmahida7181 2 года назад

Wonderful video

@RealEstateTaxTips 2 года назад

Thank you! Cheers!

@bibekshrestha527 4 месяца назад

Great education! Thank you! Quick questions (1) for the coownership (husband and wife), do we need to file Capital Gain (or Losses) and ABIL for both of us or only one person can include it? (2) if one converted a rental condo to FURNISHED condo with significant expenses, can one include the expense in the ACB/outlays and expenses?

@bakraammerzoian 3 месяца назад

Thank you for the detailed information. I would like to ask a question regarding a rental property. I own a rental property Co-ownership with my wife, 75% my share. I have the property about 7 years now, but it became my principal property since the last 2 years. Would I be exempt from capital gain tax since it my principal residence now? And how do I calculate the capital gain on my share VS my wife's?

@BH-tr9xm 2 года назад

Thank you Cherry, great content as always! My question is what if you have a few rental properties, and then declare non-residency? How is the capital gains calculated for a non-resident Canadian if I sell my investment property? Thanks.

@RealEstateTaxTips 2 года назад

Hi Bushra, it sounds like you have a very specific situation. It's much easier to have a sit down conversation with someone that knows your situation to advise you accordingly. Feel free to reach out to our office if you don't already have someone working with you.

@litlam3252 2 года назад

Hi Cherry: Thanks for your video! Very clear and informative. Just want to know can we add Tarion Warranty Fee, Agent Fee, Levy (development fee) etc to max the Adjusted Cost Base?

@RealEstateTaxTips 2 года назад

Hi Lit, thanks for being here. Unfortunately this isn't the right platform where I would be able to advise you about your personalized situation. For any questions or consultation, please contact our office at 416-548-4228 or email us at admin@cccpa.ca and we will be sure to take care of you. Thanks!

@adrianfyfe433 7 месяцев назад

Thanks. Useful what happens if you make a loss on the sale of a rental property? Does this just zero out? Thanks

@ayshatayyaba8456 6 месяцев назад

Very informative What if sold your only property that was on rent and you bought another one do you still need to pay tax?? Buying price is little higher than selling price??

@lamlamc 2 года назад

Thank you for all the amazing videos Cherry! I would like to ask how much dividend needs to be taken out for reducing the 50% capital gain tax down to 20%? This is regarding the sales of a property owned by a corporation. Would it be 50% of the net profit to be distributed as dividends in the same year?

@RealEstateTaxTips 2 года назад

The calculation gets a bit more complicated. Firstly, you need to have e refundable dividend tax on hand for you to qualify for the refund. The amount is roughly the refundable dividend tax on hand x 3. Now, this is a high level analysis and I would encourage you to speak to a professional.

@justinlam2687 2 года назад

Hi cherry! Great video! How do you calculate the capital gain of a primary residence of 4 years but was converted to a rental for 5 months prior to selling it?

@RealEstateTaxTips 2 года назад

You may be able to shelter the entire gain with the way primary residence formula is designed. Make sure you consult with a proper accountant to file the relevant form

@cindyzhang923 2 года назад

Hi Cherry, thank you for your great video! Just wondering is this calculation also work for foreign owner in BC?

@RealEstateTaxTips 2 года назад

The deductions still apply, the 50% capital gain still apply, the only difference is the applicable tax rates in your particular situation. Also, the cost of foreign tax credit would be added to the cost of building as a deduction. Hope it helps.

@sandychang9086 Год назад

Hi Cherry, thanks for the informative videos. I just found your channel and subscribed it. I have a question for you on changing a rental property to my principal residence. When my tenant moved out, I spent money to renovate the apartment then moved in. If I would like to sell this apartment in a couple of years. Can I add the reno costs to the adjusted cost base to offset the sale proceeds? Thank you.

@RealEstateTaxTips Год назад

Assuming your renovation is considered capital improvement, you can add the amount you spent to your adjusted cost base.

@natashakent6046 2 года назад

Thank you so much that was so helpful I just would like to clarify something. I’ve owned a property for four years sold it this year and for one out of those four years it was my primary residence. Do I figure out my sale price and adjusted basis then take 3/4 from those numbers on my tax paperwork to calculate my capital gains?

@RealEstateTaxTips 2 года назад

You'll need to use form T2091 on your personal tax return.

@marshawaithe2684 2 года назад

Great video, Cherry. How long do I have to live in a property to avoid capital gains upon sale? Is there a minimum amount of time required? In my situation it isn't a rental property.

@RealEstateTaxTips 2 года назад

Marsha, primary residence exemption is an annual designation and you can only designate one property per year as your primary residence. This means that you need to ordinarily inhabit in the year that you designate that property as your primary residence in the year that you try to shelter the capital gain. Ordinarily inhabit the property means you live in it, evidence based. If you rent out a property for a period of time during the duration of ownership, that portion of rental period won't qualify for capital gain exemption as primary residence...unfortunately. (Certain exception apply.)

@TomL2025 3 месяца назад

Hi Cherry, is the value of the land can not be claimed CCA?

@honeybunchofoats0694 Год назад

Thank you Cherry, How are we supposed to track capitalized improvements in case of audit? Say I own a building for 15 years and perform capital improvements every year.

@RealEstateTaxTips Год назад

You track your expenses every year, keep the receipts for all those years, until 7 years after you sell your property

@jeetbaath1900 3 месяца назад

👍🏻👍🏻

@kwejojoe1111 Год назад

Thanks for your video. I just watched it and wondering if the 50% capital gain will be added to the person's income and taxed at their marginal tax bracket as a whole or will the 50% capital gain be taxed separately at their marginal tax bracket?

@RealEstateTaxTips Год назад

The taxable portion of the Capital Gain is added to all of your income and would be taxed at the marginal rate(s) that apply.

@simonewagner4761 Год назад

Great video and explanation - but how to actually report this in the tax forms, namely schedule 3 and T776 ?

@RealEstateTaxTips Год назад

I would recommend you schedule a meeting with one of our tax professionals to assist you with your questions

@momofareedify Год назад

Extremely informative video - just a question - where do we capture GST/HST rebate on new properties?

@RealEstateTaxTips Год назад

If you are referring to GST/HST rebate received from government, you would have used it to offset against your purchase price.

@momofareedify Год назад

@@RealEstateTaxTips thank you so much :)

@songsongcanada 2 года назад

Hi Cherry, can you do a video for Airbnb operators? Thanks!!

@RealEstateTaxTips 2 года назад

Sure will add that in the list of future ideas.

@songsongcanada 2 года назад

@@RealEstateTaxTipsthank you! Your videos deserve more views and likes. They are amazing!

@thanhle-pt5qy 2 года назад

It's a very important article for me..thanks a lot....but I didn't hear you mention about property tax....can I deduct p tax from my capital gain ?

@RealEstateTaxTips 2 года назад

Thanh, property tax is typically a current expense and not included as part of the capital gain tax calculation, unless it is property tax incurred during the period that you are getting the house ready for rent.

@chathudn 6 месяцев назад

Hi Cherry, When a basement of the primary residence is rented out, does capital gains tax still apply?

@RealEstateTaxTips 5 месяцев назад

That would depend on total space of the basement vs the total house. I would recommend you schedule an appointment with my team to review your scenario.

@TomL2025 3 месяца назад

I have a rental for many years, I lost track, Where can I find my recapture tax? Can I find it in my account with CRA?, I

@samanthawilson5446 2 года назад

Question about capital gain tax exemption. I know that if you file section 45(2) and don't have another primary residence, you can exempt yourself from paying capital gain tax for up to 4 years on a rental that was once your primary residence. However, what if you did not file section 45(2) (rookie mistake)... have sold your house... can you back date filing this letter, or have you missed your chance and need to claim capital gains?

@RealEstateTaxTips 2 года назад

Late filing of 45(2) can be submitted, but a penalty is imposed by CRA.

@ursbruhin3044 2 года назад

Hello Cherry, Can I change from sole proprietor ship to a company at anytime and what would be the cost and implications? I am planning to sell my rental property once the new rental property is complete. Any way to reduce capital gain? thank you, Urs

@RealEstateTaxTips 2 года назад

Cost to transfer - ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-poa3oAky9fQ.html We have a report specifically related to how to reduce capital gain tax - www.therealestateaccountants.ca/capital-yt

@boriskofman7852 2 года назад

Cherry, What happens if a building depreciates at the time of sale. For example, adjusting cost base $250,000, 20,000 was taken as CCA and at the time of sale building itself was valued at $230,000. Am I correct that in this case, it should be no recapture? Thanks

@RealEstateTaxTips 2 года назад

If it was sold for $230K then year, there's no recapture

@boriskofman7852 2 года назад

Thank you very much,Cherry for clarification!

@jayselvaratnam 2 года назад

If we had rented out a property then moved in after X number of years to make it primary residence can we avoid this capital gains tax?

@RealEstateTaxTips 2 года назад

Primary residence exemption is an annual designation. To qualify to claim primary residence exemption on a property that you've lived in (so you don't have to pay tax), you will have to ordinarily inhabit in the property during that particular year. In another words, if you live in that property for 3 years, but rent it out for 5 years previously, you will only be able to designate three years of capital gain as tax free and you have to pay taxes on the 5 years that you rented it out. There're election available to shelter more taxes if certain conditions met. Typically you will still have to pay tax.

@BH-tr9xm 2 года назад

@@RealEstateTaxTips Same question at Jay, but what happens if you live in the property (upstairs) and rent out the basement for say 10 years? How is the capital gains calculated from a primary yet rental home?

@RealEstateTaxTips 2 года назад

@@BH-tr9xm PR exemption is a very complicated subject. It goes back to how big your home was, did you do any structural change to accommodate the rental purpose, etc.

@RealEstateTaxTips 2 года назад

@@BH-tr9xm Best case scenario you can shelter the entire capital gain under primary residence exemption. Worst case scenario is that you would have to pay taxes on the the portion of capital gain that belongs to the rental space

@pabawathieperera9118 2 месяца назад

I refinanced once during the 15 years and received only 18,000 . It was at the very beginning of purchasing. Does it make a difference for the sale?

@RealEstateTaxTips 2 месяца назад

Yes cash flow and taxes are two different scenarios. Likely will receive less (for what you have already got in the past from refinancing)

@eliedarwich7901 2 года назад

You talk about everything but what about the down payment that was used to purchase the property? When it comes in the calculation?

@RealEstateTaxTips 2 года назад

Hi Elie, the calculation of capital gain tax is based on the purchase price, not based on your own cash flow. The downpayment forms part of the purchase price of your property - it is irrelevant for the purpose of calculating capital gain tax - other than if you used borrowed fund as downpayment - in which case, you get to deduct the interest expense related to the borrowed fund.

@johannndsouza 2 месяца назад

Ok what if (same example) I live in the property for the first 3 years then the next 3 years i move in with a friend and rent it out for the next 3 years then sell on year 3. (I am also in burlington/oakville)