Taxes on capital gains are levied on the difference between the initial purchase price and the appreciation of an asset, such as real estate holdings, or investments, such as stocks or mutual fund shares. You have a capital gain and must pay tax on it if you sell an asset or investment for more money than you originally paid for it—which is what most of us want to do.

It’s common to refer to capital gains as “realized” or “unrealized.” When you sell an item or investment for a profit, you have what’s known as a realized capital gain. If you haven’t sold your investments despite their increasing worth, you may have an unrealized capital gain. Although they give you a great feeling, you won’t pay taxes on them until you sell.

A crucial point to remember right away is that every person’s circumstances are different, so you should always speak with a tax expert to find out what would be ideal for you.

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What is Capital Gains Loss?

An investment or asset that has lost value since you bought it is said to have suffered a capital gains loss. If capital losses have one benefit, it’s that they can be used to offset capital gains, which lowers your total tax liability.

The CRA permits you to deduct any capital gain in any of the three years prior, not just from that year, if your sole losses are capital losses. A net capital loss may also be carried forward into the future at any moment.

What’s Not Changing:

Canadians preparing for retirement and businesses looking to invest in the country need a fair and stable tax environment. With this in mind, the government is making it clear that upcoming laws and reforms to capital gains in Budget 2024 do not include:

• Modifications to the Primary Residence Exemption: The government is keeping the exemption in place to prevent the capital gains tax Canadians pay on selling their primary dwelling. Your home’s sale proceeds will not be subject to taxes.

• Tax Elections or Realizations on Paper: A capital gain is often realized when a capital property is disposed of. This means that, with very few exceptions, the taxpayer must formally give up their ownership interest in the property to another individual. The government has no plans to implement an election allowing taxpayers to choose to realize a gain or loss on their property without an actual transfer, nor do the current income tax regulations allow for such an election.

• Dividing the $250,000 Yearly Cap for Individuals with Corporations: Individuals and organizations are not permitted to share the $250,000 annual barrier under the new regulations. Only individual taxpayers are eligible for this benefit. Most trusts and corporations must report taxable income of two-thirds of their capital gains tax rate in Canada.