Residential Capital Gains
In one of the most overtaxed countries in the world the last thing we need is more taxes, yet the government has, on several occasions proposed a Capital Gains Tax on real estate. It would be very challenging indeed for any Canadian taxpayer to list all the taxes that they already pay.
The recent so called “carbon tax” has been disastrous – there is no logical basis for the tax it does nothing at all to reduce our carbon footprint but is does drive up costs on pretty much everything. The carbon tax also creates a costly, and carbon positive, administrative burden on the CRA and tax industry generally. The proposed Capital Gains Tax on housing will be even more problematic for taxpayers – who already pay a Capital Gains Tax on real property, other than a principal residence.
Once implemented, like any other tax it will not be rescinded, in spite of any promises to the contrary. Again, like any other tax, once implemented it will only increase. Notionally, when you sell your primary residence, you will be taxed on the “profit” – the amount of equity that exceeds the amount you paid for the property in the first place.
If I paid $200,000 for my house twenty years ago had the price of real estate remained unchanged that same home would cost $289,000 in todays dollars. Had I mortgaged the house for the full purchase price I would have paid about $190,800 in principal plus $150,000 in interest charges, and about $50,000 in property taxes and well as maintenance costs – conservatively $20,000. In other words, it would have cost me $410,800 to buy a house that should be worth $289,000.
If I sold that house today for $550,000, I would need to pay an average of 5% (according to CREA) in real estate commissions ($31,750) plus 13% HST and other conveyance costs including legal fees about $2,000. The bottom line is I paid $444,550 to buy and sell that house and the government is going to want a percentage of the “upside” based on an increased value of $350,000.
So, if I had to pay Capital Gains Taxes at 25%, I would be out another $87,500 and would have gained a whopping $17,950. As a result, I would be unable to purchase a replacement home without incurring far more debt – and let’s not forget I already paid income tax on every single penny spent to acquire the property in the first place, including the taxes payable.
What are your thoughts about paying another tax? 519-646-2222