REAL ESTATE
Capital Gains Tax Calculation On An Investment
Property:
A capital gain is the difference between what you paid for an investment
property and what you received when you sold that investment property. This gain or profit is taxable.
The following is a basic 3 step guide to figuring out a
Capital Gains Tax on the sale of an investment property .
EXAMPLE: You bought and investment property in 2002 and
are presently in the 40% marginal tax
bracket
Yr. 2002
Property
Purchase Price $200,000
Legal
Costs, Title Insurance $2,000
Land
ransfer Cost $2,000
Yr. 2004
Renovations/Improvements
$20,000
Yr. 2011
Property
Sold For $300,000
Legal
Costs
$1,000
Real
Estate Commission $15,000
STEP
1: CALCULATION OF CAPITAL GAIN
Capital
Gain =
(Purchase
Price + Purchase Expenses + Renovations/Improvements)
$300,000
– $16,000 – $224,000 = $60,000 CAPITAL GAIN
STEP 2: CALCULATION OF TAXABLE GAIN
=50%
Capital Gain = 50% of $60,000 = $30,000 TAXABLE GAIN
STEP
3: CALCULATION OF TAX PAYABLE
=
Your Marginal Tax Rate x Taxable Capital Gain
=40%
x $30,000 = $12,000 YOUR TAX PAYABLE
DISCLAIMER:
The above figures are strictly for example purposes and ease
of
calculations and do not represent actual costs and fees.