How to Keep More Money: A Homeowner’s Guide to Capital Gains

My clients often ask me about the financial side of real estate, especially when it comes to taxes. Just last week, during a home visit, a client turned to me and asked, “Pete, how can we make sure we’re not paying more taxes than we need to?” It’s a great question, and with the recent changes to capital gains rules in 2024, there’s never been a better time to understand how to keep more of your money.

The Situation: What You Need to Know About Capital Gains

Let’s start with the basics: when you sell a property for more than what you paid for it (including improvements and selling costs), that’s a capital gain. The good news? You don’t pay tax on the full amount. As of 2024, 66.7% of your capital gains are taxable – but there are smart ways to manage this.

Key Points to Consider

Principal Residence Exemption

Here’s something every homeowner should know: if you’re selling your primary residence, you might not have to pay any capital gains tax at all. The Principal Residence Exemption can save you thousands, but there are important rules:

– You can only designate one property as your principal residence per family per year

– You must report the sale on your tax return, even if you’re claiming the exemption

– The exemption typically covers your home and up to 1.24 acres of land

Business Property Considerations

For those of you who own a business property or are thinking about selling your business, there’s some exciting news. The Lifetime Capital Gains Exemption (LCGE) limit increased to $1.25 million in June 2024, and it’s now indexed to inflation. This means you could potentially sell your qualified small business corporation shares without paying any tax on the first $1.25 million of gains.

Professional Insight: Smart Strategies for Homeowners

As a real estate professional in Quebec, I’ve seen how proper planning can make a significant difference. Here are some proven strategies to help you keep more money in your pocket:

1. Timing Matters: Consider the timing of your property sale. Sometimes, spreading the sale over two tax years using a capital gains reserve can help manage your tax burden.
2. Document Everything: Keep detailed records of all improvements you make to your property. These costs increase your adjusted cost base and reduce your capital gains when you sell.
3. Plan for the Future: If you own multiple properties, strategic use of the principal residence designation can maximize your tax savings over time.

What To Do Next

The world of real estate and taxes can seem complicated, but you don’t have to navigate it alone. Here are your next steps:

1. Review your property documentation and ensure all improvements are recorded
2. Consult with a tax professional about your specific situation
3. Plan ahead – tax strategies work best when you think long-term

Remember, every situation is unique, and what works for one person might not work for another. If you have questions about real estate or tax planning in the Quebec area, don’t be shy to reach out. I’m here to help you make informed decisions about your property investments.

*Note: Tax rules and exemption amounts are subject to change. Always consult with a qualified tax professional for the most current advice for your situation.*

Ready to Make Smart Real Estate Moves?

Looking for expert guidance in the Quebec real estate market? I’m Peter Thompson, and my team and I specialize in helping homeowners make informed decisions about their property investments.

Whether you’re buying, selling, or just planning ahead, we’re here to help you navigate the Quebec real estate market with confidence. Our deep local knowledge and years of experience mean you get practical, actionable advice tailored to your needs.

Peter Thompson

Peter graduated from Lasalle College in hospitality and spent 13 years managing the infamous Chateau du Lac, where he built a reputation for leadership and forming genuine, trusting relationships.

Peter’s real estate career is built on a foundation of honesty, trust, and tireless effort. He takes pride in going above and beyond to ensure his clients feel supported and confident throughout their journey. He regularly provides timeline market insights on his local service areas of Saint-Lazare, Hudson, Vaudreuil, and Rigaud, but has expanded to service clients across the Vaudreuil-Soulanges and West Island regions.

Outside of work, Peter’s world revolves around his wife and two young boys, who inspire him every day. A die-hard Montreal Canadiens fan, Peter never misses a chance to cheer on the Habs or crack a dad joke to keep everyone smiling.

This is #AskPete. If you have any real estate questions, feel free to send them and I will get you the answers. Or stay up to date on the latest tips for real estate buyers and sellers by clicking the YouTube button below:

Peter Thompson