Schedule G and Schedule 3 Tax Forms for Capital Gains (Loss) Reporting

When tax season arrives, most Canadians are familiar with the standard T4 slips from their employer. However, what you may not be aware of is that a tax return may require additional forms, especially if you sold a property or investments. It’s common for tax filers to get confused about how to report the sale, transfer, or loss of these assets. 

In this guide, learn what capital gains and losses are, how the capital gains inclusion rate works, and which tax forms you need to report them. (Hint: It’s the Schedule 3 and Schedule G.) You'll also get practical tips and find out common mistakes to avoid when filling out these forms. 

What’s a capital gain or loss? 

When you sell a taxable asset for more than what you paid for it, it’s considered a capital gain. On the other hand, when you sell a taxable asset for less than what you paid, then it’s called a capital loss. 

These are the most common types of assets that may trigger a capital gain or loss:

• Securities. Shares of stocks, bonds, mutual funds, index funds, exchange-traded funds (ETFs), and cryptocurrencies. Some assets are tax sheltered, such as registered accounts. So the the gain/loss only applies to non-registered assets.
• Real estate. Property other than your principal residence, such as a cottage, rental property, or land.
• Business assets. Equipment, machinery, buildings, and company shares. 

Some key terminology to learn is "disposition of capital property." This simply means that capital gains or losses may result from an actual or deemed disposition of a capital asset. This could be when you sold or transferred something you owned.

For example, if you turn a rental property into your primary home, the Canada Revenue Agency (CRA) considers this as if you sold it at its current market value. Let's say you purchased the rental property for $400,000. When you converted it to your home, it was worth $450,000. The $50,000 ($450,000 - $400,000 = $50,000) increase is considered a capital gain. Thus, you'll need to report the taxable portion on your tax return for that year.

However, not all of a capital gain is treated as taxable income. So, it’s important to understand how much of your gain is actually included in your tax calculation.

Capital gains inclusion rate

Triggering capital gains doesn’t mean the entire amount is taxable. Currently, the inclusion rate is set at 50%, meaning only half of your total capital gain is added to your total income, according to the CRA.

For example, if you realize a capital gain of $10,000 by selling stocks, then only $5,000 would be taxable. Also, if you sell a cottage and realize a capital gain of $100,000, then only $50,000 would be taxable. 

Keep in mind, in a year where your capital dispositions result in an overall capital loss, 50% of that amount — or the net capital loss — can be carried back 3 years or forward indefinitely to apply against taxable capital gain income. Capital losses can only be used to offset or reduce capital gain income.

What is Schedule 3?

The CRA’s Schedule 3 tax form is used for reporting capital gains or capital losses on your federal T1 General return. All Canadian residents (including Quebec) are required to complete this form. 

What is Schedule G?

Revenu Québec’s Schedule G is used for reporting capital gains or capital losses on your provincial TP-1 tax return. Only Quebec residents are required to fill out this form.

So, if you live outside of Quebec, you only need to fill out Schedule 3 for your tax return. If you live in Quebec, you must complete both schedules. 

No matter how big or small the capital gain is, be sure to report it to avoid any penalties or interest charges from the CRA or Revenu Québec.

Forms	Purpose	Who files it	Type
Schedule 3	Capital gains and losses	All Canadian residents	Federal  (CRA)
Schedule G	Capital gains and losses	Quebec residents only	Provincial  (Revenu Quebéc)

What new Canadians and dual filers should consider

The CRA taxes you based on your residency, not your citizenship or immigration status. For example, if you moved to Canada during the year, you typically report the capital gains or losses from the date that you officially became a resident of Canada.

According to the CRA, if you’re a dual filer (meaning that you report in multiple jurisdictions), then you must report your worldwide income in Canadian dollars from the time you were a resident of Canada. If you’re new to Canada and need assistance on how to file your tax return accurately, you can easily seek help from one of our TurboTax experts. 

How do you fix an error on your tax return?

Occasionally, mistakes can occur. For instance, you forget to report a stock sale or enter the wrong amount. Don’t worry, it doesn’t require you to redo your tax return. 

To fix the error, you just need to make an adjustment request using the following forms:

• Federal. You can file a T1 Adjustment Request (Form T1-ADJ) with the CRA.
• Quebec. You can fill out the request for an Adjustment to an Income Tax Return Form (TP-1.R-V) through the Revenu Québec website. 

Practical tips to make capital gains reporting easier

Here are some tips for filing your tax return when you have a capital gain or capital loss:

1. Maintain organized records. Be sure to document your transactions. Also, file your brokerage slips or property documents in a digital or physical folder.
2. Track your adjusted cost base (ACB). The ACB is a record of the transactions or commission fees incurred to acquire the asset. You’ll need this information (whether it's a capital gain or loss) when you file your tax return. Find out how to calculate the adjusted cost base.
3. Understand the principal residence rule. In Canada, the principal residence rule states that you when you sell your primary home, it's exempt from capital gains taxes. However, you still need to report the sale on your tax return.  

Simplifying capital gains reporting during tax season 

Remember, any individual who sells off their investments or property will need to report their capital gains or losses on their tax return. If you’re new to Canada or live in Quebec, be sure to verify that you’re using the correct tax forms when filing or making adjustments. Taking the time to file your Schedule 3 tax form and Schedule G tax forms will help prevent any penalties. Best of all, with the help of a tax expert, you can leverage capital losses as a tax-saving strategy. 

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