Definition

Capital gains are the profits you earn when you sell an asset for more than you paid for it. The common sources include stocks, ETFs, mutual funds and real estate (other than your primary residence).

Analogy

Imagine you bought a designer purse for $500 a few years ago. Now, you sell it for $1,000. The $500 profit is your "capital gain." Just like that purse, investments can grow in value over time, leaving you with gains that the government might want a share of.

Little-Known Fact

In Canada, you don’t pay tax on gains from selling your primary home, but gains from investment properties are taxed.

Quick Quiz

Review your investment portfolio and identify any assets you've held for over a year. Create a spreadsheet documenting your purchase prices and current values.

This gives you a clear picture of potential capital gains before making any selling decisions. Consider consulting a tax professional to discuss optimal timing for realizing gains or losses based on your tax bracket and overall financial situation.