Understanding Capital Gains Tax in Canada Canada applies capital gains tax when you sell assets—like real estate or stocks—and make a profit. Only 50% of your capital gain is taxable. That means if you sell something for a higher price than you bought it, half of the difference gets added to your taxable income. When Capital Gains Apply Capital gains tax applies when you dispose of property, investments, or real estate without qualifying for an exemption. This includes stocks, mutual funds, rental properties, and sometimes even personal-use items. Principal Residence Exemption Explained If you’ve lived in a property as your main residence, you may qualify for the principal residence exemption. That exemption can entirely eliminate capital gains tax on the sale of that property, as long as certain conditions are met. Calculating Adjusted Cost Base (ACB) The Adjusted Cost Base is what you paid for the asset plus any additional costs like legal fees, commissions, or improvements. A...