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I have a few questions on capital gains tax on a 2nd property in Ontario, Canada.

1) Is capital gains calculated based on Sale price - Current Mortgage, or Sale price - purchase price? Im assuming the latter for my next question.

2) If I sold house today for $550k, and purchased it at 250k, what would be my profit ? Please correct me.

my calculation is as follows:

550 - 260 = 290k , Initial gain

290k * .5 = 145k , 145 is taxable

145k * ~.37.70 (not sure on this tax rate) = $54,665 K is taxed from my sale price of 550k,

Leaving me with 550k - $54,665 - Mortgage remaining as my profit ?

Any help or correction would be appreciated, thanks

  • In general, gains are profit realized, so you're on the right track. You may be able to add some costsof ukeep/repairs to the mix, decreasing the profit; check the rules for what is and isn't allowed where you ste, and what records are necessary to justify that. – keshlam Jan 12 '17 at 16:54
  • Did you take any depreciation on it in the years that you owned it? – zeta-band Jan 12 '17 at 21:02
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    @zeta-band , No, don't think so, it is my parents so i'm not 100% sure. – Jonnyboi Jan 13 '17 at 21:24
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    Good if they didn't. Canada has depreciation recapture rules like the US does and that can complicated the taxes. In general, the taxable income will be sale price - purchase price. Your realization will be the sale price - what you still owe on the mortgage. (Realization is the cash you get out of it.) – zeta-band Jan 13 '17 at 21:59
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    You say in a comment "it is my parents". Do you mean (a) it is theirs (and they are selling it); (b) it was theirs, and you bought it off them (some time ago); (c) it was theirs and you've inherited it? For (a) or (b) it should be the sale prices less the purchase price (that they or you paid). For (c) -- if it's similar to the UK -- CGT will be the sale price less the "market value" at time of inheritance. – TripeHound Jul 11 '17 at 7:14
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The capital gain is based on sale price minus purchase price. The amount of mortgage is irrelevant.

In your example the gain is $300k. You would pay that times the appropriate rate.

You can claim deductions for expenses incurred in running the property, including mortgage interest paid, repairs etc.

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