Capital Gains Tax Rate in Canada: Keeping it Simple

Capital Gains Tax Rate in Canada: Keeping it Simple

I received a T5008 from my brokerage indicating that I had proceeds of disposition to report for my taxes.  I thought they must have made a mistake because I didn’t remember selling anything.  Then I remembered I transferred some shares in kind from my non-registered account to my TFSA account and from my non-registered account to my RRSP account earlier in the year.

I did this so that I didn’t have to pay the commission again on my income generating asset (I already paid it the first time when purchasing it for my non-registered account).  The non-realized capital gain at the time was also a small amount so that I wouldn’t have to pay too much capital gains tax on it.

Little did I realize, after doing that, one year later, I spent an inordinate amount of time trying to calculate my adjusted cost base because I bought so many of these particular shares over time in my non-registered account.  It was not very fun.

I’m not an accountant, so please consult your professional accountant for verification and for further details.  

What is a Capital Gain Tax Rate?

A capital gains tax that occurs when you sell a security (stock) in a non-registered account (not a TFSA or RRSP).

In Canada, capital gains are taxed at 50% of your marginal rate.

Let’s say you sold BMO (which I would never do, it’s one of my favourite Canadian dividend stocks) for a profit of $10,000.  Only $5000 of that would be taxed at your current marginal tax rate (I like to check for this).  So let’s say your rate was 31%.  That’s your capital gains tax rate for Canada.  You only pay taxes on your realized capital gains (like you’re making it formal, and selling the shares and ‘cashing out’).

Let’s assume that the $10,000 was the capital gain after accounting for the selling price and the ACB.

What is ACB?  Adjusted Cost Base (according to the government of Canada) is the cost of the property plus any fees to acquire it.

ACB (adjusted cost base) = Book Value (what you paid for the stock) + Commissions/Fees

Capital gain or capital loss= Selling price – ACB (how much buying this stock cost you)

Therefore, the capital gains tax rate would be:

$10,000/ 2= $5000

$5000 x 31%= $1550

So on a $10,000 profit, you would pay $1550 of taxes on this amount.

To lower your capital gains tax, you can offset them with capital losses, or lower your marginal rate.

Capital Gains Tax Canada

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When Does This Not Matter?

When does this not matter?  When do you not have to worry about capital gains taxes and capital gains tax rates?

When your investments are in a TFSA or RRSP or registered account.

You don’t have to keep meticulous information when it is in a registered account because there are no capital gains to pay (or on the flip side, capital losses to claim) when your investments are sold in a registered account like a TFSA or RRSP.

In addition to the tax shelter benefits of these registered accounts, that’s the beauty of the TFSA and RRSP and why I am a fan of both (and fill up both before I have to spill over into my non-registered accounts).

Although it sucks to take a loss and realize a loss, capital losses can be carried back 3 years to previous tax returns or forward to any year.


How Do I Keep Track of My Capital Gains?

Since I get online statements with Questrade, it’s a bit of a gong show to filter through each statement and find when and where I sold my non-registered stocks to trigger a capital gain.  This tax season, I had the luxury of using Wealthica to find my capital gains information and the purchase dates and adjusted cost base very quickly.

It’s a free website, like the personal capital of Canada, where you can see all your investments in one place.

If you use Questrade with Wealthica, they import 5 years by default through API.  They state they can import more upon request.

Wealthica tells you the book value and the quantity of shares and the date that it happened.

Wealthica Tax Organization CRA

You just click on the individual transaction to open it up, and then you can get the book value.

As you can see, it’s very easy to look up information, as you can filter through the transaction type e.g. transfer or buy or dividend.

Capital Gains Tax Canada Weatlhica

If you’re interested in signing up for Wealthica, they have generously provided a Google Sheets Export ($5.99/month value) for 3 months to readers who link more than $100K in investments.  Just email me for the promo code (click on the button below).  Here’s my Google Sheets Export add-on review.  It’s very useful for tax time.

If you just want to sign up for Wealthica without the Google Sheets Export optional add-on, click here.

An Even Easier Way to Get the Adjusted Cost Base

Starting in April 2019, Wealthica actually made it even easier to get the adjusted cost base for your non-registered capital losses and gains.  They added a new “Realized Gains Report” feature as part of their free add-ons.

Instead of doing the complex calculations required to figure out your ACB and keeping methodical records of when you bought something and when you sold something and how much commission you paid, Wealthica now has a feature for this and you don’t even need to do any sort of calculation.  Best of all, it’s free!

Here’s what it looks like:

Realized Gains ACB

As you can see you can filter it by the exact company that you purchased for your DIY portfolio and see when you bought and when you sold and the fee you paid and the automatic ACB calculation.

ACB Realized Gains Weatlhica

As you can see, the realized gains report is very easy to use and I’m glad Wealthica created this because it was very painful to try and figure out my records for non-registered stocks.

How Do I Keep it Simple When TransferRing in Kind?

So as mentioned, I shot myself in the foot, when I purchased multiple small amounts of shares of MO over 2017 and 2018 (like 21 shares here, 11 shares there, 10 shares there, and 7 shares there).  Then I transferred in kind to my RRSP of 22 shares (given that I didn’t want to go over my RRSP limit).

Since I bought shares in different episodic periods of the same stock, I had different ACBs, depending on the book value.

Learned my lesson, won’t do that anymore.

To keep it simple when transferring in kind, transfer in kind the amount that you purchased.  For example, I bought 11 shares of BMO in 2017 (when it was a good price and there wasn’t enough cash in my TFSA) in my non-registered.

Then in 2018, I transferred 11 shares of BMO to my TFSA in kind.  Come to do my 2018 taxes in 2019, it was much easier to calculate the adjusted cost base for this proceeds of disposition because I had exactly the same number of shares that I transferred.

That’s how I plan to keep in simple in the future when transferring in kind when I have a capital gain.

Now, if you have a capital loss and you transfer in kind to your RRSP or TFSA, the loss is not deductible.  When this occurs, it would be better if you sold the shares and then used the cash (if you didn’t have cash to invest in your TFSA/RRSP) to contribute instead.  Then you would at least be able to use or carry forward your capital loss.

How do you keep track of your capital gains? 

Do you sell often?  Have you finished your taxes?

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15 thoughts on “Capital Gains Tax Rate in Canada: Keeping it Simple”

  1. GYM, I think it’s been about 10 years now that the US govt requires brokers to track and report cost basis on sales. It used to be on the honor system for the taxpayer to report cost accurately (not overstate it) so the govt closed that opportunity to understate tax liability. I always did it honestly, but I really like the new system because all of the work is done for me. Tom

    • @Tom- Oh wow, can’t believe it was the honour system just 10 years ago… hopefully the US has been able to get more tax money from investors/ tax payers since that change.

  2. That’s really cool that Canada taxes you on 50% of your capital gain instead of taxing your whole gain. That really helps when your in high tax bracket like anything 25% or higher.
    With brokerage companies tracking any sales on your portfolio for a while now, it’s real easy to track any gains(or losses) that I have. I try to sell mainly long term since I don’t want to get taxed higher when selling for the short term.

    • @Kris- Does the US tax the whole gain? My brokerage (Questrade) is a discount brokerage so the sales aren’t tracked so easily unfortunately.

  3. I use

    Its free and calculates the capital gains/loses and the ACB at no cost. I used it last year when I decided to sell off one of my positions that was losing money. There is a free version which allows you to calculate the ACB for up to 3 non-registered accounts and if you want more, I believe they have the option for an annual subscription of $50. I just use the free one as I only have 1 non-registered investment account (with Questrade).

    Its great, you get a print out and take that to your accountant, and they easily enter in the details when filing taxes.

    • @moneyhelp- Thank you so much! Just checked it out, looks simple but straightforward. I’ll definitely look into this for next year’s taxes.

      • You bet! Love your articles.

        One question to help clarify things for me. I was already aware that the CRA taxes an investor @ 50% of the Capital gain. So, going by your example, if you made a gain of $10K, they would tax you on $5K.

        However, my question is with respect to the marginal rate. So according to (I’ve used this site as well as a reference) if you’re in the 31% bracket (which is over $77,313 up to $87,813), let’s say you made $85K income from your employer and then when we need to add the capital gain from the stock sale, how is the tax calculated?

        1) is the tax calculated such as that the $5K is added to the $85K (so $90K total income) therefore bringing you to the 33% tax bracket, OR
        2) since you would fall under the 31% bracket (without the capital gain) do you calculate it as you have in your example ($5000 x 31%= $1550) and then add the $1550 to the $85K (so $86,550 income in total) therefore still keeping you within the 31% tax bracket?

        • @moneyhelp- Great question. You first calculate the total capital gain and then divide it by 50%. Then you put that on line 127 to calculate your gross income. The gross income gets deducted by various deductions to get your net income. Then your net income determines your marginal tax rate. So I think it would be number 1, but you could get below the 33% tax bracket by other deductions etc.

  4. Oops premature post! when you buy additional shares of a stock you already own, you have to average out the new cost base between all of your shares. So selling a specific lot of shares you bought won’t save you any math.

    • Using will save you on the math 🙂 Also, many people forget, but the ACB also needs to be averaged out if you hold the same security at different brokerages.

    • @Anon- Yes definitely. It only worked for me because I bought 11 shares of XYZ stock in my non-registered ALONE and then transferred that to my TFSA (simple!). For my other shares that I bought 21 shares here and 22 shares here and 11 shares there I had to calculate ACB on all of those purchases.


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