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Capital Gains Tax

In Vancouver Real Estate – many owners have made plenty of money  on their homes or Real Estate investments. So, the government wants their piece of it of course!

Vancouver Real Estate & Capital Gains

What is Capital Gains Tax in Real Estate and how does it work?

Simply put, when you sell an investment home in B.C you are taxed on 50% of the net profit. This is very different from business income as you get taxed on 100% of that income.

Let’s say you sell an investment property in Vancouver and you make $100,000 you will be taxed on $50,000 of that. If you are in the 33% tax bracket you will be taxed $16,500 approximately. Definitely consult your accountant however as everyone has a different situation.

Capital Gains Exemptions

Simply put, If you have lived in the property that has appreciated and it is deemed your primary investment you should be exempt to pay capital gains in most cases. However, if you buy a home, see capital gains and sell once every 12 months – be careful! The government may deem this your business and you could be taxed.

The unwritten rule is one year of living in the home. However, it is all about intent. If you moved in, had a baby and the 1 bedroom was not enough you can in some cases sell and be exempt. However, you need to confirm this with a lawyer or Real Estate Accountant before making that decision.

When a home turns into an investment

So you have lived in your Vancouver home for a year and decide to rent it out – What happens? If you have seen a appreciation on the value since you have bought and lived in the home you need to appraise it when you move out.

After you move out and rent it you are now on the hook for any capital gain that happens after you move out.

Example:

  • Bought a Vancouver condo in January 1, 2015 (probably in multiple offers…!) for $500,000
  • You rent the home out as of January 1, 2016: You have a Realtor & appraiser determine the value of your home is $625,000
  • You sell your home in January 2017, 2016 for $700,000
    • Your taxable capital gains will be half of the $75,000 you have made since you turned it into an rental property or investment.
    • Taxable capital gains = $37,500 | Say you are taxed at a rate of 33% your capital gains tax should be around $12,000.

This is a very general look at how it could work and everyone has a different scenario. *Please consult your accountant and/or Real Estate Lawyer

As a Vancouver Realtor for over a decade now I have many contacts who can helps us determine your situation. With a specific Real Estate Accountant, Lawyer and more we can make sure you know very well what your situation may be.

Thinking of selling? Find out what your home or investment is with a free home evaluation! 

For much more information on Capital Gains tax visit the Canadian Revenue Agency…. 

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