With Canada’s Budget 2024 rolling out, there are significant changes to capital gains tax rules that you should be aware of—especially if you’re involved in the Toronto real estate market. Good news for those looking to sell their principal residence: the existing exemption on capital gains remains unchanged. Let’s break down what these updates mean for your other property investments, including Toronto condos and houses in Toronto.

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The Basics of New Capital Gains Rates

The details matter, especially if your gains are significant:

→ For gains exceeding $250,000, the first $250,000 is taxed at the original 50% rate. Any excess is taxed at the new 2/3 rate.

→ For example, if you sell a house in Toronto and realize a gain of $600,000:

• $125,000 is taxable from the first $250,000.
• $233,333 is taxable from the remaining $350,000, at the new rate.
• Total taxable gain increases to $358,333 from what would have been $300,000 under the old rules.

Impact on Selling Properties in Toronto

1. Principal Residence

If you’re selling your principal residence in Toronto, rest easy; the tax exemption on capital gains continues to protect you.

2. Other Real Estate Investments

→ Toronto Condos: Those considering selling rental condos in Toronto should be mindful of these tax changes, especially if your property has significantly appreciated.

→ Houses in Toronto: The tax changes will also impact those looking to sell houses that are not their principal residence, especially if the sales yield gains over $250,000.

Seeking further insights into the Toronto real estate scene? Explore these blogs:

• Check Yourself Before You…Sell Your House: Things to Know About Selling Your Home in a Shifting Market
• Crunching the Numbers: Should You Buy or Rent in Canada?
• Tick-Tock: Should You Time the Market?

2024 Transitional Tax Rules

This year is a transitional phase:

• Gains from January 1 to June 24, 2024, will be taxed under the old 50% inclusion rate.
• Gains from June 25 to December 31, 2024, will adopt the new 2/3 rate.

Example:

• Suppose in 2024, you sell a Toronto condo in May with a gain of $600,000 ($300,000 taxable) and a house in Toronto in July with a gain of $400,000 ($250,000 taxed at 50% and $150,000 taxed at 2/3, resulting in $100,000 taxable).
• Total taxable gain for 2024 would be $525,000.

Conclusion

These new tax regulations are set to ensure fairness but could also influence your tax responsibilities on larger transactions. Whether you’re selling a condo or a house in Toronto, it’s crucial to consider these changes. As always, we recommend consulting with a financial advisor to navigate these waters effectively.

Still have questions or need assistance understanding how these changes might impact your property decisions? Homeplicity Realty Group is here to guide you through the intricacies of Toronto’s unique market. Reach out, and let’s ensure you’re fully prepared for what lies ahead.

Interested in buying or selling properties in Toronto? Give us a call or text at Homeplicity Realty Group, 647-973-8392, for expert guidance and personalized service!