Capital gains tax in Quebec: important rules for owners

Today I will share important information about capital gains tax. Every homeowner must know these rules.

Changes to the law have already officially entered into force. The tax inclusion rate is 66.7 percent for the portion of profit that exceeds $250,000. Owners of second homes and rental properties now pay more when selling.

Who will not be affected by the new rules

This change caused a lot of noise in the press. But its impact on the housing market remains limited. This innovation will not scare away buyers. For comparison, 25 years ago the inclusion rate was 75 percent.

The new law will not affect owners of primary residences. When selling your main home, you do not need to pay Canada capital gains tax rule amounts. Farming and fishing lands are also exempt from this tax.

The rules have almost no effect on flipping. Buying property for quick resale after renovation rarely brings a net profit over $250,000. Renovation expenses significantly reduce the final amount. Therefore, this category of investors will remain out of the risk zone.

How to calculate and pay the tax

Capital gains are the benefit from selling an asset. This can be land, a house, or shares. For the calculation, you need to find the difference between the sale price and the purchase price.

Here is a simple example. You bought a plot for $100,000 and sold it for $150,000. Your net profit is $50,000. By law, only half of this amount is taxed. You will add $25,000 to your annual taxable income.

Now let us consider a large profit of $300,000. The first $250,000 will be taxed at the old rate of 50 percent. But the remaining balance of $50,000 falls under the new rate of 66.7 percent. The law affects only those who earn a lot on a single deal. The advice of an experienced realtor in Montreal will help you correctly assess all financial consequences before selling.

 If you are planning to buy or sell a home in the Greater Montreal area, contact me. I will be glad to protect your interests in the market.

Denis Kornienko. Votre expert en immobilier à Montréal. J'aide les familles à bâtir un avenir solide au Canada.