How Much Is Taxed When Selling Your House in Ottawa

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Did you know that selling your house in Ottawa could cost you a significant chunk of your profit due to taxes?

When you sell a home, it’s important to know how taxes might affect you. This helps you avoid surprises that could reduce your profit.

Taxes like capital gains can make selling a home confusing. There are also exemptions for your main home. Understanding these rules is important if you want to get the most money from your sale.

So, when you sell your house, how much is taxed in Ottawa?

Let’s go over the details. 

Federal and Provincial Taxes on Property Sales in Ottawa

When selling a house in Ottawa, it’s important to understand the taxes involved. Both federal and provincial taxes can affect the amount you receive from the sale.

Federal Taxes: Capital Gains Tax

At the federal level, the main tax to consider is the capital gains tax. This tax applies to the profit you make from selling a property that isn’t your primary residence. 

As of June 25, 2024, the capital gains inclusion rate in Canada increased from 50% to 66.67% for individuals with capital gains above $250,000. This means that if you sell a secondary property and make a profit, 66.67% of that profit is taxable if it exceeds the $250,000 threshold. 

For example, if you sell a property and realize a capital gain of $300,000, the first $250,000 would be taxed at the 50% inclusion rate, and the remaining $50,000 would be taxed at the 66.67% inclusion rate. The taxable amount is then added to your income for the year and taxed according to your marginal tax rate, which depends on your total income.

Provincial Taxes: Land Transfer Tax

In Ontario, when you purchase property, you are required to pay a Land Transfer Tax (LTT). The tax is calculated on a sliding scale based on the property’s value:

  • Up to $55,000: 0.5%
  • $55,000 to $250,000: 1.0%
  • $250,000 to $400,000: 1.5%
  • Over $400,000: 2.0%
  • Over $2,000,000 (for one or two single-family residences): 2.5%

For example, if you purchase a house for $600,000, the land transfer tax would be calculated as follows:

  1. Up to $55,000: 0.5% = $275
  2. $55,000 to $250,000: 1.0% = $1,950
  3. $250,000 to $400,000: 1.5% = $2,250
  4. $400,000 to $600,000: 2.0% = $4,000

Total Land Transfer Tax: $8,475

It’s important to note that the Land Transfer Tax is typically paid by the buyer, not the seller.

Municipal Taxes

Ottawa does not impose additional municipal land transfer taxes on property sales. However, it’s always a good idea to check for any local fees or charges that may apply.

Staying Informed

Tax laws can change, so it’s crucial to stay updated on both federal and provincial tax regulations. Understanding these taxes can help Ottawa homeowners make informed decisions when selling their property.

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Deductions and Exemptions When Selling Your House in Ottawa

When selling a property in Ottawa, it’s important to understand how to reduce your taxable income through available deductions and exemptions.

Principal Residence Exemption

If the property you’re selling is your principal residence, you may be exempt from paying capital gains tax on any profit made from the sale. This exemption can significantly reduce your taxable income. To qualify, the property must have been your principal residence for every year you owned it. It’s essential to report the sale on your income tax return to claim this exemption.

Deductions for Selling Costs

For properties that don’t qualify for the principal residence exemption, certain selling expenses can be deducted to reduce the taxable capital gain:

  • Legal Fees: Expenses paid for legal services during the sale are deductible. For example, if you paid $1,500 in legal fees, this amount can be deducted from your capital gain.
  • Realtor Commissions: Commissions paid to real estate agents are deductible. If you paid a $5,000 commission, you can deduct this from your capital gain.
  • Home Improvement Costs: Only the costs of improvements that increase the property’s value and are not considered regular maintenance can be added to the property’s adjusted cost base, thereby reducing the capital gain. For instance, if you spent $3,000 on significant home improvements, this amount can be added to your property’s cost base.

Example Calculation

Here’s how these deductions can affect your taxable capital gain:

  1. Capital Gain: $100,000
  2. Legal Fees: $1,500
  3. Realtor Commission: $5,000
  4. Eligible Home Improvement Costs: $3,000

Total Deductions: $1,500 + $5,000 = $6,500

Adjusted Capital Gain: $100,000 – $6,500 = $93,500

Taxable Capital Gain: As of June 25, 2024, in Canada, 50% of capital gains up to $250,000 are taxable. Therefore, $93,500 × 50% = $46,750 is added to your income and taxed at your marginal tax rate.

Importance of Detailed Records

Maintaining thorough records of all expenses related to the sale is crucial. This includes receipts for legal fees, realtor commissions, and eligible home improvements. Accurate documentation ensures you can substantiate your deductions if required.

By utilizing these deductions and exemptions, Ottawa homeowners can effectively reduce their taxable income when selling their property.

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Calculating Taxable Amount and Marginal Tax Rate When Selling Your House in Ottawa

When you sell a property in Ottawa, it’s important to understand how the profit, known as capital gain, is taxed. Here’s a simple breakdown:

Calculating the Taxable Amount

  1. Determine the Capital Gain: Subtract the original purchase price from the selling price.
    • Example: If you sell your property for $500,000 and bought it for $400,000:
      • Capital Gain: $500,000 – $400,000 = $100,000
  2. Apply the Capital Gains Inclusion Rate: As of June 25, 2024, in Canada, 50% of capital gains up to $250,000 are taxable.
    • Example: For a $100,000 capital gain:
      • Taxable Amount: $100,000 × 50% = $50,000

Understanding Marginal Tax Rate

Your marginal tax rate is the percentage of tax you pay on your next dollar of income. It depends on your total taxable income, including the taxable portion of your capital gain.

In Ontario, for the 2025 tax year, the combined federal and provincial marginal tax rates are as follows:

  • Up to $49,280: 20.05%
  • $49,281 to $98,560: 24.15%
  • $98,561 to $150,000: 29.65%
  • $150,001 to $220,000: 31.48%
  • Over $220,000: 33.89%

Example:

  • Other Income: $90,000
  • Taxable Capital Gain: $50,000
  • Total Taxable Income: $90,000 + $50,000 = $140,000

With a total taxable income of $140,000, your marginal tax rate would be 29.65%.

Calculating Net Proceeds

To determine your net proceeds from the sale:

  1. Subtract Selling Expenses: Deduct costs like legal fees, realtor commissions, and eligible home improvements from the selling price.
    • Example:
      • Legal Fees: $1,500
      • Realtor Commission: $5,000
      • Home Improvement Costs: $3,000
      • Total Deductions: $1,500 + $5,000 + $3,000 = $9,500
  2. Calculate Adjusted Profit: Subtract total deductions from the capital gain.
    • Adjusted Profit: $100,000 – $9,500 = $90,500
  3. Determine Taxable Amount: Apply the capital gains inclusion rate to the adjusted profit.
    • Taxable Amount: $90,500 × 50% = $45,250
  4. Calculate Tax Owed: Multiply the taxable amount by your marginal tax rate.
    • Tax Owed: $45,250 × 29.65% = approximately $13,420
  5. Find Net Proceeds: Subtract the tax owed from the adjusted profit.
    • Net Proceeds: $90,500 – $13,420 = approximately $77,080

Understanding these calculations helps you plan for the costs associated with selling your house in Ottawa.

Reporting and Filing Taxes After Selling Your House in Ottawa

When you sell your home in Ottawa, it’s important to report the sale to the Canada Revenue Agency (CRA) to comply with tax laws and avoid penalties.

Reporting the Sale

Since 2016, homeowners must report the sale of their principal residence on their income tax return. This is done by completing Schedule 3, “Capital Gains (or Losses),” and Form T2091 (IND), “Designation of a Property as a Principal Residence by an Individual (Other Than a Personal Trust).” Accurate reporting ensures compliance and helps avoid penalties.

Required Documentation

To accurately report the sale, maintain the following documents:

  • Sale Agreement: A copy of the agreement confirming the sale.
  • Proof of Improvements: Receipts and documentation for any significant home improvements made, as these can adjust the property’s cost base.
  • Legal Fees Receipts: Proof of any legal fees incurred during the sale.
  • Realtor Commission Receipts: Documentation of the commissions paid to your realtor.

Keeping detailed records supports your tax filings and can be crucial if the CRA reviews your return.

CRA Monitoring and Audit Risks

The CRA closely monitors real estate transactions to ensure proper reporting. Inaccurate or incomplete information can trigger audits and lead to penalties. Timely and accurate reporting reduces the risk of audits and associated fines.

Tax Implications

If your property was your principal residence for all the years you owned it, you might qualify for the principal residence exemption, potentially eliminating capital gains tax on the sale. However, you must still report the sale to claim this exemption. The taxable portion of any gain is added to your income for the year and taxed at your marginal tax rate.

Filing Deadlines

For most individuals, the deadline to file your income tax return is April 30 of the following year. If you or your spouse or common-law partner are self-employed, the deadline is June 15. However, any taxes owed are due by April 30. Missing these deadlines can result in penalties and interest charges.

Final Words

When you sell your house, how much is taxed in Ottawa depends on several factors, including capital gains tax rates, federal and provincial obligations, and the deductions or exemptions you can claim. Understanding these elements is essential for reducing your taxable income and complying with CRA guidelines.

Accurate reporting and careful planning play a key role in optimizing your financial results. By knowing how taxes work and leveraging available options, you can make the selling process in Ottawa smoother, more efficient, and financially rewarding.

Discover Your Home’s True Value with Lyne and Dominique

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Wondering how selling costs in Ottawa could impact your bottom line? Start with a free home evaluation to find out your property’s true market worth and make informed decisions.

We’ll provide a detailed estimate using local market trends, comparable sales, and your home’s unique features. Plus, we’ll guide you through key selling costs like agent commissions, legal fees, and staging expenses, showing you how to minimize costs and maximize your profit.

Take the first step toward a successful sale. Contact us today for your FREE home evaluation and confidently tackle the Ottawa real estate market!

Picture of Dominique Milne

Dominique Milne

Author/Owner

I have been one of Ottawa’s most trusted Lifestyle Real Estate Agents for more than 15 years. Providing direct, honest, and experienced guidance in both English and French, I have carved an exclusive niche in the region built on loyal relationships with sophisticated buyers and sellers.

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