How Are Capital Gains Taxed in Canada?

As a Christian financial nonprofit organization in Canada, the Canadian National Christian Foundation (CNCF) aims to provide accurate and faith-based financial guidance. One topic that often raises questions among our community is Canada's capital gains tax. Understanding how capital gains tax in Canada works is crucial for making informed investment and charitable giving decisions.

What Are Capital Gains?

Capital gains refer to the increase in value of an asset — such as stocks, real estate, or bonds — over the time you own it. When you sell the asset, the difference between the selling price and the purchase price is your capital gain. It's essential to note that capital gains tax in Canada only applies when you realize the gain, meaning you sell the asset.

How Capital Gains Are Calculated

Calculating your capital gains tax in Canada involves a few steps:

• Determine the Adjusted Cost Base (ACB): This is the original purchase price plus any additional costs like commissions.
• Calculate the Proceeds of Disposition: This is the selling price minus any selling costs.
• Find the Capital Gain: Subtract the ACB from the Proceeds of Disposition.

Capital Gain = Proceeds of Disposition − Adjusted Cost Base

The capital gains tax rate in Canada is unique because, generally, only 50% of your capital gains are subject to taxation. This taxable amount is then added to your income and taxed at your marginal tax rate. For example, if you have a capital gain of $10,000, only $5,000 will be taxable.

Exemptions and Deductions

There are several ways to reduce your capital gains tax liability in Canada:

• Principal Residence Exemption: If the property sold was your primary residence, you might be exempt from capital gains tax.
• Lifetime Capital Gains Exemption: This applies to the sale of qualified small business corporation shares and some other assets.

Impact on Charitable Giving

Understanding capital gains tax in Canada can significantly affect your charitable giving strategies. Donating appreciated assets directly to a charity can offer dual benefits: you avoid capital gains tax and receive a charitable donation tax credit.

Being aware of how Canada's capital gains tax works is crucial for both your investment strategy and charitable giving plans. Always consult with a financial advisor to make the most informed decisions.

Charitable giving is an opportunity to bless others as Christ blessed us. It’s also an important part of a sound financial plan. The Canadian National Christian Foundation provides philanthropic advice and wants to connect God’s money with God’s work. 

Our staff, our leadership, and our board are all believers who want to help you manage your assets and guide you through creative giving solutions that also benefit you. We can handle non-cash gifts efficiently, getting the money into the field as soon as possible with 100% of your principal always available for your charitable grant recommendations. You can get started by opening a donor-advised fund today!

About Canadian National Christian Foundation

CNCF is a community of givers who are seeking to advance the Kingdom of God by connecting the resources God has entrusted to them with His work on earth.

Similar to other public foundations, CNCF’s difference is the commitment of its staff and directors to the Word of God, its non-denominational history and status as a Christian foundation, and its ability to allow donors to donate anonymously, at a time and gift value of their choosing.  Learn more by visiting our website.