Capital Gains

Sell a rental or second home for more than it cost you, and half the profit is added to your income. Canada taxes capital gains at a 50% inclusion rate — the proposed 66.67% increase was cancelled on 21 March 2025 and never took effect. This calculator works out the gain, the taxable half, and the approximate tax at your marginal rate.

What this calculator answers

It computes your capital gain — sale price minus selling costs minus your adjusted cost base — applies the 50% inclusion rate for the taxable capital gain, and multiplies by your marginal tax rate for a rough tax estimate. It answers the question every rental owner asks at sale time: after the CRA takes its share, what do I keep?

What it deliberately does not cover

It does not handle the flipped property rule: sell a residential property within 365 days and the profit is generally business income — 100% taxable, no principal residence exemption — unless a listed life-event exception applies. It does not calculate CCA recapture: claimed capital cost allowance is recaptured as ordinary income at 100% on sale, separately from the capital gain. It does not model the principal residence exemption for mixed-use years, non-resident withholding mechanics, or alternative minimum tax. If any of those apply, this number is a starting point for a tax professional.

Every input, explained

Sale price. The gross price the buyer pays. The common error is stopping here and calling the difference from the purchase price the gain — selling costs come off first.

Selling costs. Commission plus legal fees on the sale. The common error is forgetting these entirely; on a $680,000 sale at 5% commission plus legal fees, that is $36,000 of gain that is not taxable.

Adjusted cost base (ACB). Your purchase price plus the land transfer tax and legal fees you paid when you bought, plus capital improvements — a new roof, new windows, an addition, a full kitchen. Two expensive errors: adding repairs and maintenance (repainting and furnace fixes are not capital), and forgetting to add the purchase land transfer tax and legal fees. Dig out your original statement of adjustments.

Capital improvements. Enter each with its cost and, ideally, a receipt. The common error is reconstructing a renovation budget from memory; without documentation, the CRA can disallow it.

Your marginal tax rate. The tax rate on your next dollar of income, combining federal and provincial tax — not your average rate. Using the average rate from last year's return understates the tax on the gain, sometimes dramatically.

How the math works

First the gain: sale price, minus selling costs, minus the adjusted cost base. Then the inclusion: multiply by 50% for the taxable capital gain. Then the estimate: multiply by your marginal tax rate. Three steps.

Worked example: Calgary rental duplex, bought 2016, sold 2026

A landlord bought a Calgary duplex in 2016 for $520,000 and sells in 2026 for $680,000, having replaced the roof ($14,000) and windows ($9,000) — both receipted capital improvements. Selling costs: 5% commission plus $2,000 legal.

1. Capital improvements: $14,000 + $9,000 = $23,000.
2. Adjusted cost base: $520,000 + $23,000 = $543,000. (2016 purchase land transfer tax and legal fees also belong here — add them from the original statement.)
3. Selling costs: $680,000 × 5% = $34,000 commission, plus $2,000 legal = $36,000.
4. Net sale proceeds for the gain calculation: $680,000 − $36,000 = $644,000.
5. Capital gain: $644,000 − $543,000 = $101,000.
6. Taxable capital gain at the 50% inclusion rate: $101,000 × 50% = $50,500.
7. Estimated tax at a 40% marginal rate: $50,500 × 40% = $20,200.

The gross profit looked like $160,000. After selling costs, improvements, and tax, the after-tax gain is $80,800 — roughly half the headline number.

Provincial quirks and edge cases

The 50% inclusion rate is federal and identical in every province; what differs is your marginal rate, which blends federal and provincial tax — in Quebec, Revenu Québec taxes the gain as well, so use a combined marginal rate. The biggest edge case is CCA recapture: every dollar of capital cost allowance claimed is recaptured and taxed as ordinary income at 100% on sale, on top of the capital gain above. Another is change of use: converting a rental to your principal residence (or the reverse) can trigger a deemed disposition — a sale for tax purposes with no money changing hands. If you owned the property partly as a rental and partly as your home, the principal residence exemption can shelter the home years plus one additional year. You must still report the sale on Schedule 3 with Form T2091 even when you believe the gain is fully exempt — failing to report can cost you the exemption entirely.

Questions to ask a professional

1. Tax professional: Which of my past expenditures qualify as capital improvements for my ACB, and which were repairs already expensed?
2. Tax professional: I claimed CCA in some years — what is my total recapture amount, and how does it change the tax beyond the capital gain?
3. Tax professional: I lived in the property for part of the ownership period — how does the principal residence exemption plus the one extra year apply to my years?
4. Tax professional: Even if the gain looks fully exempt, what must I file — and by when — to protect the exemption?