If you’re planning on selling a business or investment property at some point in the future, you’ll need to be aware of how to save on capital gains taxes. Capital gains tax is an annual tax on any increase in the value of your assets. This includes any gain that you make on the sale of a property. Although it’s not something you want to pay every year, you do have to remember that you could be hit with an increased capital gain if you sell a property within a certain time period.
One way to lower your capital gain tax bill when you’re planning on selling a house or other asset is to consult a professional before you do anything. They can help you analyze your financial situation and see what type of tax bracket you fall into. Once you know what bracket you’re likely to fall into, they can help you devise a plan on how to save on capital gains taxes.
To apply for an exception, you must meet the qualifications set forth by the Canada Revenue Agency. The qualified individuals are investors that have made at least six acquisitions within the last five years. Those investors will be able to claim the exception if the price of their first acquisition exceeds the adjusted cost base (ACB) of the property being purchased. In order to apply for an exception, you must attach documentation proving your ability to pay taxes and you must also provide an expense report showing that you’ve spent a specific amount on each acquisition.
The most important piece of advice when considering how to save on capital gains taxes is to educate yourself. Familiarize yourself with the taxation rules and requirements of the country in which you live. By doing so, you’ll know exactly what you need to put up, where you need to keep putting it and how to minimize your taxable income.
Don’t wait until the very last minute before you start digging through your records. Keep all your records and files as current and up-to-date as you can. Tax laws change regularly and it’s in your best interest to stay on top of them. It may seem like a good idea to carry around a large file of papers, but just because it’s large, it’s also difficult to retrieve, so it’s best to keep everything organized and readily accessible.
While it is true that you have the ability and knowledge of the rules, it would also be wise to hire an accountant, tax professional planner, or CPA to do this for you. Having someone who knows all the little details and can help guide you through the process can make the difference between success and failure.
You should instead keep all your banking matters with those personally local to you. By keeping your banking matters local and within your own tax jurisdiction, you avoid any possible offshore tax liabilities. Many offshore bank accounts will only be effective if you make yearly deposits of a certain amount into them and use them exclusively. By keeping your financial affairs local, you ensure that you are not breaking any laws by doing so.
Generally, any amount of the capital gain must be paid off within one year of its inclusion. The exception to this rule is if you sold the property within three years of its incorporation, in which case you would have a longer period to wait before paying it off.