Capital gains tax in Canada instituted in the early 1970’s required Canadian residents to pay a 50% tax in capital gains. If that sounds like a lot of money, that’s because it is a lot of money. The purpose of the tax was originally to finance the social security system and establish an equitable tax code. The tax has been increasing ever since.

Canadians who received capital gains during the current tax year are likely subject to the capital gains tax in Canada. However, as is the case with most tax codes productions are available under the Canadian tax law. Of particular interest, income that was derived from a disposition of capital property may be deductible. If you had capital gains losses under certain conditions you can offset your capital gains tax. There is a myriad of loopholes in the Canadian tax law to help you avoid overpayment.

The first and most obvious is question is whether you are considered a Canadian resident. Obviously only residents to qualify as a residents are subject to the capital gains tax in Canada. Generally speaking if you are a resident of Canada you have resided in Canada for a 183 days or more. This qualifies you as a full-time resident and subject to Canadian tax law.

You should consider what your maximum allowable education is for capital gains. Canadian law dictates a $750,000 lifetime capital gains exemption. Built with in this limit is the maximum lifetime capital gains deduction for the sale of certain properties. That limit is $375,000.

Perhaps the easiest deduction you can take is the aforementioned capital gains losses. You should determine if indeed you had losses during the tax year in question. Simply deduct the loss from your capital gains during the same year and that will result in a deduction from your capital gain tax in Canada. Losses can be carried forward and deducted from future taxable capital gains.

Capital gains tax in Canada is no different than capital gains tax in any other country. There are deductions and there are loopholes in the laws that you can use to your advantage. It is best to secure the services of a certified public accountant to help with taxes and  your capital gains tax in Canada.