It’s always great news when your investments increase in value and, as a result, you make a profit from a sale or exchange of that investment. But how does this affect your personal income come tax time? Here’s what you need to know about capital gains tax in Saskatchewan.
How Capital Gains Work
Investments can take many forms, from stocks, mutual funds, and real estate holdings. Hopefully, as it is the main goal of investment, an individual makes capital gains (a profit) on the investment and sells the property to put that increase of value in their pocket.
An individual experiences a capital gain when he or she sells or is considered to have sold, a property or investment for more than the total of its adjusted cost base (more on that below) and the expenses incurred to sell the property.
Capital gains can be realized or unrealized. For example, an individual’s house price increased in price over the ten years of ownership. At the ten-year mark, the owner decides to sell the property at a profit from the original purchase price. Since a sale occurred that put the capital gains in the owners ‘pocket’, capital gains were realized. However, before this sale capital gains were still occurring but had not been realized since the owners didn’t have a profit to add to their personal income. If you do sell the property and make a profit – an increase in capital – you have to pay tax on it at that point unless the property you are selling is your primary residence and qualifies for the primary residence exemption.
Adjusted Cost Base
Adjusted cost base influences how capital gains taxes are paid in Saskatchewan. As described by the Government of Canada, adjusted cost base (ACB) is the cost of a property (or other investment) plus any expenses to acquire it, such as commissions and legal fees. The provincial government requires that you keep a running total of the adjusted cost base, which is a set of records that will be needed come tax time.
For information on how to calculate your Adjusted Cost Base, visit our blog post here.
Capital Gains Tax in Saskatchewan
Capital gains, while added to your personal income, are taxed slightly differently as it is a different source of income. 50% of capital gains are taxed at marginal income tax rate in Saskatchewan.
To calculate the amount of tax that you will owe over the year, you will need to add half of your realized capital gains to your total personal income and tax it according to the bracket under which your income falls. Then, you calculate your personal income tax rate as you would have on just standard personal income.
Not all capital gains are treated equally. Exemptions exist for capital gains earned from the sale of qualified farm or fishing properties. If you think that you might qualify for Qualified Lifetime Exemption for capital gains with a farm or fishing property, read more about the exemption program and requirement here.
Tax Brackets in Saskatchewan
2019 provincial tax brackets for residents of the province of Saskatchewan are the following:
- 10.5% on the portion of your taxable income that is $45,225 or less
- 12.5% on the remaining portion of your taxable income that is more than $45,225 but less than or equal to $83,989
- 14.5% on the remaining portion of your taxable income that is more than $83,989
Don’t forget though, that there are also Federal tax rates that you must consider when calculating your total taxes on your taxable income. Read our blog on Federal tax rates for more information.
Claim Capital Gains on Taxes in Saskatchewan
Every Saskatchewan resident has to pay both provincial and federal personal income tax. When filing your annual tax return, applying your capital gains means collecting all relevant documents to your income, including your standard employment and all investment records, especially when you sold or exchanged your investments in that year.
To properly claim your capital gains or losses for the year 2019, you are required to fill out the Schedule 3 – Capital Gains (or Losses) in 2019.
Remember, you can also reduce your capital gains if you also have capital losses from other investments.
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