REAL ESTATE

Capital Gains Tax Calculation On An Investment Property:

A capital gain is the difference  between what you paid for an investment property and what you received when you sold that investment property.  This gain or profit is taxable.

The following  is a basic 3 step guide to figuring out a Capital Gains Tax on the sale of an investment property .

EXAMPLE:  You bought and investment property in 2002 and are presently  in the 40% marginal tax bracket

Yr. 2002                       Property Purchase Price              $200,000

                                    Legal Costs, Title Insurance            $2,000

                                    Land ransfer Cost                          $2,000

Yr. 2004                       Renovations/Improvements          $20,000

Yr. 2011                       Property Sold For                      $300,000

                                    Legal Costs                                   $1,000

                                    Real Estate Commission               $15,000

STEP 1:  CALCULATION OF CAPITAL GAIN

Capital Gain  =  Sale Price  –  Selling Expenses  –  Adjusted Cost Base

(Purchase Price + Purchase Expenses + Renovations/Improvements)

$300,000 – $16,000 – $224,000 = $60,000 CAPITAL GAIN 

STEP 2:  CALCULATION OF TAXABLE GAIN

=50% Capital Gain = 50% of $60,000 = $30,000 TAXABLE GAIN 

STEP 3:  CALCULATION OF TAX PAYABLE

= Your Marginal Tax Rate x Taxable Capital Gain

=40% x $30,000 = $12,000 YOUR TAX PAYABLE

DISCLAIMER: The above figures are strictly for example purposes and ease

of calculations and do not represent actual costs and fees.