avoiding capital gains tax

Capital gain tax basics

Capital gains taxes applies when an asset is realized, not while it is held by an investor. An investor can own shares that appreciate every year, but the investor does not incur a capital gains tax on the shares until they are sold.

Capital gains tax is included on your annual income tax return. There is no separate tax on capital gains, it is merely a component of your income tax. You are taxed on your net capital gain at your marginal tax rate.

If your total capital losses for the year are more than your total capital gains, the difference is your net capital loss for the year. It can be carried forward to later income years to be deducted from future capital gains.

Avoiding capital gain tax Tips

Capital loss offset. You can reduce your overall gains by realising losses. You might do this by selling shares that you’re holding at a loss, for instance, or by selling an antique that is no longer worth what you paid for it.

Keep your assets. Capital gains tax only becomes liable when your asset is realized or sold. If you don’t sell it, you don’t have to pay tax on the gain. you can keep it for dividend income or let the capital gain grow.