Selling a Revenue Property in Vancouver BC
Capital Gains Tax and Deducting Real Estate Commissions in Canada
So, you’ve decided to sell an investment condo or other revenue property in Vancouver. The first thing you’ll want to do is talk with your mortgage lender to check how much your mortgage penalties are going to be.
Once there is clarity on the costs to end the mortgage you have to consider The Taxman, aka Canada Revenue Agency (CRA).
I recently had the pleasure of meeting with Accountant Sean Akeroyd with Akeroyd & Leung about the tax implications of selling an investment property in Canada.
Are The Sale Proceeds of an Investment Property in Canada Taxable?
When selling a revenue property capital gains (ie an increase in the value of the property) are taxable. But by how much? “It is absolutely taxable,” Akeroyd said. “But how much depends on a couple of factors; your income tax bracket, how much income from other sources you have. Generally, 50% of the sale of an investment property will be included in your income.”
So, for example, if I buy a property for $1 and sell it for $2, I would see 50¢ of that capital gain appear on my tax return as taxable income.
If you’re looking to find out sale proceeds after real estate fees are paid, check out this great Realtor Fee Calculator!
Timing is Everything when Selling a Revenue Property!
The timing of the sale of a revenue property can affect how much tax is paid. If you know you are going to have a year where you might have a little less income and potentially move down a tax bracket (say when you retire or take a long vacation), you might want to consider holding off selling your revenue property until then.
As Sean points out, even with the additional capital gains from the sale of your revenue property, you’ll still be exposed to a lower marginal tax bracket.
More is Less? – Selling an Investment Property Owned with a Partner or Spouse Can Have Benefits
Another interesting tax scenario as it relates to selling investment properties in Canada is when the property is owned by equal partners, such as a spouse or business associate.
Let’s say one partner makes $1 a year, the other partner $2 a year. It is possible to spread the capital gains between the partners disproportionately to minimize the overall tax exposure for both. It’s common between husbands and wives.
Are Real Estate Commissions on the Sale of a Revenue Property Tax Deductible in Canada?
Lastly, I wanted to know if real estate commissions incurred when selling a revenue property in Vancouver are tax deductible. It turns out that commissions on the sale of a revenue property in Canada are tax deductible as they are viewed as a selling expense by CRA and can be deducted to lower the total taxable capital gains.
Of course, before you decide to sell any revenue property, I encourage you to consult with an accountant who can look into your specific tax situation. If you’d like to speak with Sean, he can be reached at 604 691 1744 or you can go online to http://akeroydleung.com/.
Remember Folks! Selling an Income Property in Vancouver Doesn’t Have to be Taxing!
Looking to Buy New Investment Properties? Check out this Presale Condo Map for Vancouver!
Need Advice Buying a New Construction Investment Property? Check out this great series of Videos on Buying an Off Plan Property in Vancouver!