Tax on Income from Real Estate Sale

Tax Bill on Real Estate

With the current market conditions of real estate in Vancouver and so many people buying property for their first home or investment property, it would be wise to take into consideration the tax implication, when you sell the property. Net Income from sale of property can be taxed as a business income or a capital gain, depending on the usage of the property and the primary intention of the owner.

As a property owner, you would want the gain from your real estate deal to be taxed as a capital gain. Because 50% of the capital gain is tax free. On the other hand 100% of business income is taxable. So, there is a possible audit risk built into all Real Estate transactions.

CRA wants to classify all profit from real estate sale as a business income so, they would be able to collect 100% tax on the income. Where as, property owners wants to classify income from real estate sale as a Capital Gain, so they can pay tax on 50% of the income.

note: Income from Rental Property sale is always a business income.

Real life cases regarding real estate tax implications are more complex, than the simple explanation above.

Here is a CRA bulletine, regarding Real Estate tax you can review.

We have experience with Real Estate tax issues both in Canada and USA. Contact us, we might be able to help you from huge tax burden.