Personal Income Tax -> Capital Gains and Losses
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Stocks, Bonds etc. - > Capital Gains and Losses

Income Tax Act s. 3(b), 38(a), 248(1)

A capital gain or loss is the gain or loss resulting from the sale of a capital asset, such as stocks, bonds, art, stamp collections, and real estate.  Some assets are considered personal-use property, such as cottages, cars, boats, and furniture (unless these are business assets).  Some personal-use property is considered listed personal property (LPP), such as works of art, and stamp collections.  The gains and losses for personal-use property and LPP are calculated separately from gains and losses on other capital assets.  See our articles on Listed Personal Property and Personal-use Property for more information.

A taxable capital gain is 50% of a capital gain.  The capital gain or loss is calculated by deducting the original cost of the asset from the proceeds received on the sale of the asset.  Because only 50% of the gain is taxable, less tax is paid on capital gains than on income such as interest.

An allowable capital loss is 50% of a capital loss.  It can only be used to reduce or eliminate taxable capital gains, except in the year of a taxpayer's death or the immediately preceding year, when it can be used to reduce other income.

When allowable capital losses exceed taxable capital gains in a year, the difference is the net capital loss for the year.

Capital gains can be reduced, deferred, or eliminated by:

Revised: October 26, 2010