Work out the capital gain on a sale, line by line — and gather what you need before tax time.
Who this is for & what you'll get. This is for anyone in Ontario who has sold (or is about to sell) a property that isn't fully covered by the principal residence exemption — a cottage, a rental, a second home, an investment property, or a home that was rented for part of the time. You'll get a fill-in worksheet to estimate the capital gain, a worked example with blanks, and a records list. Print it, complete it, and bring it to your accountant.
⚖️ This is a general guide, not legal advice. It can't account for your specific situation. Use it to get oriented, then confirm the details with a licensed Ontario lawyer.
🧾 Important: Treadstone Law is your lawyer, not your accountant. Capital gains are a tax matter under the federal Income Tax Act, filed on your return with the Canada Revenue Agency (CRA). This worksheet helps you organize — it does not calculate your tax or tell you the inclusion rate. Confirm every number and the current rate with a tax professional and the CRA.
How a capital gain is built (the plain-language version)
The core formula is short:
Proceeds of disposition − (Adjusted Cost Base + Outlays and Expenses) = Capital Gain
In everyday words:
- Proceeds of disposition = what you sold it for.
- Adjusted cost base (ACB) = what it really cost you to own it — the purchase price plus the closing costs you paid to buy plus the money you spent on capital improvements.
- Outlays and expenses = the costs of selling (e.g., real estate commission, legal fees on the sale).
The difference is your capital gain. Only a portion of that gain is added to your taxable income — that portion is set by the inclusion rate.
⚠️ We will not state an inclusion rate in this guide — on purpose. The inclusion rate has changed and can change again. Using last year's number can throw your estimate off badly. Look up the current inclusion rate with the CRA (or have your accountant apply it) when you do the final math.
Worksheet — complete each line
Fill in the blanks with your own figures. Keep a receipt or statement behind every number.
Part 1 — Proceeds of disposition (what you sold it for)
| Line | Item | Amount |
|---|---|---|
| 1 | Sale price (from your agreement of sale) | $ __________ |
💡 Use the gross sale price here. Selling costs come off separately in Part 3 — don't subtract them twice.
Part 2 — Adjusted Cost Base (what it cost you to own)
| Line | Item | Amount |
|---|---|---|
| 2 | Original purchase price | $ __________ |
| 3 | Closing costs to buy (Land Transfer Tax, legal fees, title insurance, etc.) | $ __________ |
| 4 | Capital improvements over the years (additions, renovations, new roof, finished basement, etc. — keep receipts) | $ __________ |
| 5 | Adjusted Cost Base = Line 2 + Line 3 + Line 4 | $ __________ |
🧱 Capital improvement vs. repair. A capital improvement (it betters or extends the property) is added here and reduces your gain. A routine repair (fixing what's there) generally is not added to ACB — it's a rental expense in the year you pay it, if the property was a rental. When unsure, keep the receipt and ask your accountant which bucket it lands in.
⚠️ CCA warning. If you ever claimed Capital Cost Allowance (depreciation) on this property as a rental, your cost base and the tax outcome can differ (and "recapture" may apply). Flag this for your accountant — don't just use the numbers above.
Part 3 — Outlays and expenses (costs to sell)
| Line | Item | Amount |
|---|---|---|
| 6 | Real estate commission | $ __________ |
| 7 | Legal fees on the sale | $ __________ |
| 8 | Other selling costs (staging fees, etc., where they qualify) | $ __________ |
| 9 | Total outlays and expenses = Line 6 + Line 7 + Line 8 | $ __________ |
Part 4 — Capital gain
| Line | Item | Amount |
|---|---|---|
| 10 | Proceeds (Line 1) | $ __________ |
| 11 | Less Adjusted Cost Base (Line 5) | − $ __________ |
| 12 | Less Outlays and expenses (Line 9) | − $ __________ |
| 13 | Capital gain = Line 10 − Line 11 − Line 12 | $ __________ |
Part 5 — Taxable portion (where you need the CRA's current rate)
| Line | Item | Amount |
|---|---|---|
| 14 | Capital gain (Line 13) | $ __________ |
| 15 | Current inclusion rate (look this up with the CRA — do not guess) | __________ % |
| 16 | Taxable capital gain = Line 14 × Line 15 | $ __________ |
The amount on Line 16 is what flows into your income and is taxed at your marginal rate. Your actual tax depends on the rest of your return — your accountant pulls it together.
Part 6 — Does the principal residence exemption apply?
If this property was your principal residence for some of the years you owned it, the principal residence exemption (PRE) may shelter part of the gain — so the taxable amount could be lower than Line 16 suggests.
Answer these to flag it for your accountant:
- Was this property ever your principal residence (a home you ordinarily inhabited)? Yes / No
- For how many of your ownership years? __________ of __________ total years
- Was it ever rented out or income-producing? Yes / No — if yes, list the years: __________
- Did your family designate a different property as principal residence for any overlapping year? Yes / No
🧭 If you answered "yes" to the first question, the PRE may reduce your taxable gain — sometimes to zero, sometimes only partially. The calculation is year-by-year and is best done by a professional. See our principal residence exemption decision guide. Remember: even a fully exempt sale generally must still be reported on your return.
Part 7 — Foreign property reporting
Owned or sold property outside Canada? Separate reporting obligations can apply to certain foreign property above a threshold, regardless of whether you sold at a gain.
- Is/was this property located outside Canada? Yes / No
- If yes, flag for your accountant: foreign property reporting may be required (e.g., the foreign income verification reporting regime — verify the current form and threshold with the CRA).
⚠️ Reporting ≠ tax. You can owe no tax and still be required to file a foreign-property report. The penalties for not filing have been significant. Confirm your obligation with the CRA.
Worked example (with blanks for your own deal)
Follow the structure; the dollar figures are illustrative placeholders for you to overwrite.
Sample cottage sale (illustrative only):
- Line 1 — Sale price: $ ________
- Line 5 — Adjusted Cost Base (purchase $ ____ + buying costs $ ____ + improvements $ ____): $ ________
- Line 9 — Outlays and expenses (commission $ ____ + legal $ ____): $ ________
- Line 13 — Capital gain (Line 1 − Line 5 − Line 9): $ ________
- Line 16 — Taxable capital gain (Line 13 × current CRA inclusion rate): $ ________
Then ask: did the PRE apply for any years (Part 6)? If so, the taxable amount may be lower. Hand the completed sheet to your accountant for the final figure.
Records to keep (the proof behind every line)
Your worksheet is only as good as your documents. Keep:
- Agreement of purchase and sale (both the original purchase and the sale).
- Statements of adjustments from both your purchase and your sale (these show the real cash in and out).
- Land Transfer Tax paid and legal fee invoices from buying — these go into ACB.
- Capital improvement receipts — invoices for renovations, additions, and major upgrades.
- Selling cost invoices — real estate commission and legal fees on the sale.
- Rental records (if ever rented) — including any CCA claimed, which changes the calculation.
- Occupancy proof by year (if claiming the PRE for any years) — utilities, insurance, mail.
- Foreign property records (if applicable) — purchase, value, and any foreign tax paid.
🗂️ Keep these for years after the sale. The CRA can review long after closing. Don't shred your file the day the deal funds.
Mini-FAQ
Why won't this guide tell me the inclusion rate? Because it changes, and a wrong rate produces a wrong estimate. The structure of the calculation is durable; the rate is not. Get the current rate from the CRA when you finalize.
Can renovations really lower my tax? Capital improvements increase your adjusted cost base, which reduces your capital gain — if you can prove them with receipts. Routine repairs generally don't go into ACB. Keep everything and let your accountant sort the buckets.
I broke even after costs — do I still report? If the property wasn't fully covered by the PRE, you generally still report the disposition even if the gain is small or nil. And a principal residence sale generally must be reported regardless. Confirm with the CRA.
How Treadstone Law can help
Treadstone Law is a digital-first Ontario law firm built for clear pricing and online convenience. We handle real estate closings and can make sure your purchase and sale paperwork — the documents that support every line on this worksheet — is clean and complete. For the tax math itself, we'll point you to a qualified accountant.
- Flat fees for real estate and many other matters — no surprises.
- Start online in minutes, anywhere in Ontario.
- Talk to a person: call 1-844-900-1070.
Explore tax and real estate services, see transparent pricing, or start a file online.
This is not legal advice
This guide is general information, not legal advice. Reading it does not create a lawyer-client relationship. Ontario laws, tax rates, and government programs change, and how the law applies depends on your specific facts. For advice about your situation, speak with a licensed Ontario lawyer. Treadstone Law is licensed by the Law Society of Ontario — reach us at 1-844-900-1070 or start a file online.