No one likes to pay tax, but almost every day we pay it on the goods and services we purchase. Still, many homeowners often ask us, “When I sell my house, do I pay tax?”
The answer to this question is tricky and depends on several factors.
The Primary Home
If you suddenly decide to sell the family home, you will not have to pay capital gain tax on it. The federal government allows families to designate a principal residence that will be exempt from capital gains should they decide to sell it.
This rule only applies to the family’s primary home and not to any additional revenue properties or secondary homes.
When you do decide to sell your primary residence, you will still owe all property taxes up until the date of sale, plus any late fees you owe.
The Non-Primary Home / Income Property
If you own several pieces of property and decide to sell one, the profit minus all of the expenses associated with the sale will be treated as income for that tax year.
For example, if you purchased your home for $500,000 and sold it over a year later for $550,000, you would have a capital gain of $50,000. However, only 50% of that gain would be taxable. For a Canadian in the 33% bracket, you would owe $8,250 on that balance, meaning that you get to keep $41,750 of that profit.
Gaming Capital Gains
No one likes to pay capital gains, especially when it comes to selling a home.
You can reduce the amount of capital gains owed by offsetting them with capital losses. This is a popular tax trick that is used by almost all Canadians.
For example, if you sold your home for a $15,000 net profit, but you lost $5,000 on the stock market, you can offset the capital gains tax owed with your capital losses. Simply look up the inclusion rates and calculate the difference between the two totals.
If this seems too intense for you, and for most it is, simply hire an accountant to make sense of it for you.
There is a reason why most Canadians are willing to pay a lot of money for a quality accountant. Top accountants understand the Canadian tax system and how to minimize the amount of money you will owe in capital gains.
Other Fees for Sellers
Other fees that you will need to consider when selling your home include legal fees, realtor fees, any GST on the realtor and lawyer’s fees, early payment penalties for your mortgage (if you have them), property taxes and late fees, any adjustments owed to utility companies, and any other fees you agree to pay on behalf of the buyer.
HomeLife White Rock is here to help you make sense of capital gains and to help you understand what taxes you will pay when you sell your home. We are familiar with the White Rock real estate market and the various taxes associated with selling a property within it. If you have any questions, please feel free to contact us today.