QUESTION:
I am a European Union passport holder, i have not worked and do not intend
to work in Canada. Following many vacations in Canada i would like to
purchase a property in Victoria British Columbia, i am interested to know
how much capital gains i will have to pay (as a percentage) when i
eventually sell the property. I believe the percentage will change depentant
on if the property earned rental income, so i would like to know how much
gapital gains would be for someone in my position both for a property that
earned and a property that did not earn rental income. From what i have read
online it appears that there is no allowance for length of time a property
is owned, i would like to clarify, ie a property purchased for $100k owned
for 10 years and sold for $101k, would this type of property be liable for
capital gains on $1k, even though in real terms an investment of this kind
could arguably be considered a substantial loss, is this correct? i would
also like to clarify if work carried out on a property can be taken into
consideration with regards to capital gains ie a property purchased for
$100k renovated at a cost of $50k and then sold for $150k would this
property still be liable for capital gains on the $50k as it was over and
above the original purchase price, is this correct?? Any assistance you can
offer is greatly appreciated. Regards
==============================
david ingram replies:
You are not asking for much.
At the moment, capital gains are approximately 12% on the first $65,000, 15%
on the next $65,000, 20% on the next $40,000 and 22% after that depending
upon the province and the tax rates in place at the time.
It does not matter if it was rented or left empty for your use when in
Canada.
There is no inflation allowance.
If you buy it for $100,000 and net $101,000 1, 5, 10, or 30 years later, you
would pay tax on the $1,000 under today's rules.
If you spend $50,000 on improvements, it is added to the ACB (adjusted cost
base) of the property for capital gains purposes.
If you spend $5,000 a year on repairs and maintenance over ten years for a
total of $50,000, it is just an operating expense and not deductible against
the Capital Gains. It would be deductible against rental income if the
house was rented.
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