# Ontario Capital Gains,are profits also part of taxable income?

Say I Sell my investment property house for 500k and bought it for 250k. Leaving me 250k profit.

I'd be taxed on 50% of that correct: 250/2 = 125k taxable. and 125k Profit.

Now my 125k is taxed around 33% if im correct, leaving me with 83.75k + 125k = 208k profit.

1) Is this 208k Profit part of my taxable income aswell?

2) How does my mortgage come into play? What if I paid off half of my mortgage here ? What would be my profits?

• what? you are very confused. If you have hundreds of thousands of dollars from selling a house, pay a tax person to explain this to you. But basically once you've paid capital gains tax on your capital gains, that's that. You don't then bring whatever is left over from that into income. And the mortgage is irrelevant. – Kate Gregory Aug 15 at 15:08
• Pay for a certified tax adviser and they will tell you what you didn't see and how to file the tax form, you will gain more knowledge on your investment taxation afterwards. E.g. deduction of the cost before calculating the profit, offset losses of your other capital assets to reduce the tax bracket, etc. – mootmoot Aug 16 at 8:34

Say I Sell my investment property house for 500k and bought it for 250k. Leaving me 250k profit.

So far so good.

I'd be taxed on 50% of that correct: 250/2 = 125k taxed. and 125k Profit.

No. 50% of your profit counts as taxable income. 50% of it is tax free. So \$125K of the profit is taxable, but that doesn't mean you pay \$125K tax.

So you add \$125K to the amount of income you have. (This is kinda done for you as you fill in the tax form)

So you have a taxable income of whatever you earned elsewhere + \$125K from the house sale. You pay tax on that at whatever the appropriate rate is - it varies according to whatever else you earned.

If that rate is 33% then you will have paid 33% * \$125K = \$41.25K.

(The calculation can be more complicated because of marginal tax rates)

But the key point is you pay tax on 50% of the profit: you don't pay 50% of the profit in tax.

You might look at this simple guide to capital gains.

Mortgage

Payments on loans you took out for purposes of investing (including mortgages on investment properties) are tax deductible. You reduce your income by the amount of interest you paid on the loan. But at this point a tax advisor would be really helpful, and almost certainly find you more in savings than they would cost.

• Sorry I meanted to say 125k is taxable. not taxed. So then the 50% remainder is taxed at personal income level? – Jonathan Aug 15 at 22:41
• @Jonathan The first 125k (50%) of a 250k capital gain would be included in your taxable income and be taxable at ordinary marginal income tax rates. The other 125k is not taxable at all. Capital gains are subject to a 50% inclusion rate. The excluded part isn't taxed. Consequently, capital gains are subject to much less income tax compared to ordinary income. – Chris W. Rea Aug 16 at 1:27
• @ChrisW.Rea thank you for the clarification. The Capital gain are subject to much less income tax because only 50% of the gain is taxable. – Jonathan Aug 16 at 1:47
• @Jonathan You are correct - capital gains have a lower tax rate than other income in Canada - only 1/2 of capital gains are included in taxable income, and the other half is tax-free. – Grade 'Eh' Bacon Aug 16 at 13:12