Capital gain is the profit earned on the sale of a ‘capital asset’. Canadian Revenue Agency (CRA) defines securities in the form of shares, investment properties, bonds, and stocks as well as real estate as “capital assets''. Capital gain results when the selling price of an asset exceeds its purchase price.
Investments yield income when they are held and create capital gains when sold. We pay income tax on the income generated by investments and pay capital gain tax when investments are sold at a profit. CRA requires the following amounts to calculate any capital gains:
(i) Proceeds of the disposal: The selling price of the capital asset.
(ii) Adjusted cost base (ACB): How much is originally paid for the capital asset.
(iii) Outlays and expenses: Costs deemed necessary before selling, for example, fixing-up expenses, finder’s fee, commissions, broker’s fee, surveyor’s fee, legal fees, transfer taxes, and advertising costs.
If you still don't understand how to calculate tax you can contact an accountant.
Capital gains can be of two types: realized and unrealized.
(i) A realized gain occurs when a capital asset is sold at a level that exceeds its book value.
(ii) An unrealized gain is a potential profit resulting from an investment. This is a paper gain, reflecting an increase in capital investment’s value but has not yet triggered a taxable event, as the capital asset is yet to be sold.
Capital gains are taxed only when they are realized. Realized capital gains are further classified as long-term and short-term.
(i) Long-term capital gains are derived from assets that are held for more than one year before they are disposed of.
(ii) Short-term capital gains are derived from assets that are held for a year or less.
Capital gain tax rates depend on how long the seller owned or held the capital asset. You cannot earn any benefit from any special tax rate on short-term capital gains. Instead, these profits are usually taxed at the same rate as your ordinary income. Long-term capital gains are taxed at a lower rate than short-term gains. This tax policy is adopted to encourage investors to hold assets subject to capital gains for more than a year. A lower tax rate on long-term investment is an incentive given to invest in the economy-building companies rather than aiming to generate quick profits.
CRA’s tax laws surrounding capital gains taxes are more complicated than generally presumed by tax filers. In Canada, if you make money off a capital asset, you pay capital gains tax on it. You cannot play tips or tricks or exploit the loopholes in tax laws to avoid your tax liability on capital gains. Here you need to take on board a capital gain tax accountant to help you legally, and effectively mitigate the tax impact on capital gains.
Every tax type has different requirements, rules, and thresholds, finding all this data can create confusion and errors. The best course of action to make this job less stressful would be to consult a capital gain tax accountant or a reputable accounting firm. Doing this will keep more of your capital gains for yourself. There are plenty of ways to defer, reduce or even avoid capital gain tax. Tax accountant’s professional advice can prove these investment returns to be the most tax-friendly investment returns. They can help you determine what works best in your specific situation. You can also check out on an any accounting firm which will handle both of your work accounting and bookkeeping.
There are online directories comprising lists of several tax advisors. You can shortlist a tax accountant for advice on capital gain tax considering the following:
If you are looking for a professional Tax Accountant who can lead you through the process of claiming business expenses on your tax return, then feel free to reach out to Filing Taxes at 416-479-8532. Schedule your tax preparation appointment with us and take the first step towards proper management of your finances. Our professional personal tax accountants will make sure to get you the maximum tax refund on your personal tax return.
Disclaimer:
The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.
i. Handle it yourself.
ii. Hire a tax accountant.
Let’s resolve this basic dilemma of every taxpayer together by reading through the article.
When is it appropriate to file taxes yourself in Canada?
The foremost factor to consider is whether you have enough time and knowledge to file your tax return. If the answer is yes, then in the first place move on with preparing a tax return yourself. Also if you have a simple tax situation or you have a single source of income and no complex investment portfolio then filing taxes on your own is worth it. If you are unsure about the tax stuff you can contact an accounting firm to get started with your taxes.
Again doing your taxes will save you money, you will have to pay less for a software package than to hire a qualified tax professional. The Canada Revenue Agency (CRA) has a handy list of free tax software that is certified to work with its NETFILE program for filing electronically. In addition, there are also free tax clinics to help Canadians with modest incomes and a simple tax situation. You can find a checklist of documents, a concise easy-to-use guide, and tax forms on CRA to assist the tax filers.
If you have a complicated tax scenario and you feel like you don’t understand the tax implications of your financial activities, it's time to get a tax professional on board. The incredible complexity of the tax system mostly overwhelms people so it’s worth hiring a tax accountant who can save you not only time and stress but also money. Tax accountants have plenty of experience navigating the multiplex world of taxes which means you don’t have to take stress about navigating that complexity yourself.
There is no doubt in adopting a “does it yourself” approach towards tax filing can save you the fees of a tax accountant. However, if you have a complex income portfolio then making mistakes on your tax forms could be detrimental to your tax return and should be avoided at all costs.
Tax accountants have their fingers on the pulse of changing trends and laws of the tax world. Tax laws change and evolve frequently hence if you don’t consider this constant state of flux you might end up making mistakes on your taxes and missing out on credits or deductions you might be eligible for. It’s your tax accountant's job to file your tax return considering the latest developments in the tax world with the most up-to-date information.
Clearly, there is ample justification to hire a tax accountant to do your taxes. But the question here is ‘How exactly do you do that?
Before you hire a tax professional you must consider some key traits of a good tax accountant.
Ensure the professional is specialized in taxes and holds a grip on recent or upcoming changes to the tax landscape. An experienced tax accountant will bring more expertise to the table which can make your taxes done, an easier and less stressful experience. The accountant must be a bookkeeper also.
A tax accountant must be keen to dig into your financials to understand your business. Tax consultancy demands customized service, a one-size-fits-all approach will not be appropriate to apply.
Keen attention to detail is imperative as there is a lot to keep track of. There is information to gather, forms to fill out deadlines to meet…a need to organize the influx of information.
The clarity in communication is vital for tax consultancy. It requires fostering open communication, keeping the client informed about what’s going on with his taxes, and being available to answer any queries client might have about the process.
Check for the audit protection service. Although the experienced tax accountant will be an armor against the CRA audit, to put it differently. Still if due to any circumstances audit is inevitable then the tax expert shall be knowledgeable enough to defend your rights. Specifically, be able to breeze you through the audit easily and keep more of your hard-earned money.
Once you figure out that your tax needs are to be supported by a competent tax accountant and you understand the characteristics of a professional. Who can do this for you the third question that arises
“How to find a good tax accountant?”
Narrow down the pool of potential tax accountants near you by searching through the following mediums
1. Referrals,
2. Online reviews,
3. List of tax accountants at professional networks,
4. List of tax practitioners at the state board of accountancy
Verify the credentials of the prospective Tax Accountant Toronto. If you got the tax preparers' names from the state board of accountancy, their credentials are most likely legitimate.
There are different categories of tax professionals. Figure out the best tax professional for you and your business.
Interview prospective tax accountants.
Ask for a price quote to make sure that the fees are in line with your budget.
In other words never sign a tax return before checking its accuracy, no matter who prepares your tax return; you are ultimately responsible for its contents.
Take enough time to hire a reputable tax expert considering all the guidelines mentioned in this article. The objective of hiring a tax professional is to make tax filing less stressful. Save time, and get some extra spending money from return.
If you are looking for a professional Tax Accountant in Toronto to file your personal or corporate taxes. In that case, feel free to reach out to Filing Taxes at 416-479-8532. Schedule your free 30-Min non-obligation tax preparation appointment with us and take the first step towards proper management of your finances. Our professional personal tax accountants will make sure to get you the maximum tax refund on your personal tax return.
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