Taxes shape the way people invest, spend, and save. Every country sets rules to ensure fairness in how gains are shared with the state. In Canada, one of the key rules applies to capital gains. To grasp its effect, it is important to break down the concept and the standards that guide it.

What Capital Gains Mean

A capital gain is the profit made when you sell an asset for more than it cost you. The asset generally include pieces of a property, shares in a company, or even a valuable item such as art. The fundamental difference between the selling and the original purchase price is considered to be the most important aspect. If the figure is positive, it is a gain. If it is negative, it is a loss.

The Tax Rules in Canada

Capital gains tax in Canada does not apply to the full gain. Instead, only part of it is included in your taxable income. This share is known as the inclusion rate. Currently, the rate stands at 50 per cent. That means if you earn a profit of 20,000 Canadian dollars, you only need to include 10,000 when calculating your taxable income. The amount is then taxed at your personal income rate.

Taxes shape the way people invest, spend, and save. Every country sets rules to ensure fairness in how gains are shared with the state. In Canada, one of the key rules applies to capital gains. To grasp its effect, it is important to break down the concept and the standards that guide it.

What Capital Gains Mean

A capital gain is the profit made when you sell an asset for more than it cost you. The asset generally include pieces of a property, shares in a company, or even a valuable item such as art. The fundamental difference between the selling and the original purchase price is considered to be the most important aspect. If the figure is positive, it is a gain. If it is negative, it is a loss.

The Tax Rules in Canada

Capital gains tax in Canada does not apply to the full gain. Instead, only part of it is included in your taxable income. This share is known as the inclusion rate. Currently, the rate stands at 50 per cent. That means if you earn a profit of 20,000 Canadian dollars, you only need to include 10,000 when calculating your taxable income. The amount is then taxed at your personal income rate.