# Capital gains tax.... Added to income, or not?



## praire_guy (Sep 8, 2011)

Lets say I made 30k in income, but also 100k capital gains. 

Would I pay tax on the 100 k based on 30 k income, I.e 12% tax, or would it be based on 130 k income, I.e 12% on the first 31 k, 13.88% from 31 k up to 41 k , etc?

I,searched cra's web site. I,have a headache.


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## OptsyEagle (Nov 29, 2009)

You pay tax on your net taxable income. That is the amount on your return after adding income from all sources. So if you had a capital gain of $100,000 and it is included in your income at 50%, then you would pay taxes based on an income of $80,000 that year (in your example).

And by the way. It appears, in your example, that you seem to be forgeting about provincial taxes as well.


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## praire_guy (Sep 8, 2011)

I didn't forget about provincial taxes, I just wanted to simplify the question. 

Thanks for the answer.


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## Eclectic12 (Oct 20, 2010)

praire_guy said:


> I didn't forget about provincial taxes, I just wanted to simplify the question.
> 
> Thanks for the answer.


Or you could install some tax software or download a tax spreadsheet to estimate the complete amounts.

Comparison of free tax software
http://en.wikipedia.org/wiki/Comparison_of_Canadian-tax_preparation_software_for_personal_use
Tax Return spreadsheet
http://www.peeltech.ca/mytax.shtml

... just a thought.


Or this CRA web page might help:
http://www.cra-arc.gc.ca/tx/ndvdls/...tng-ncm/lns101-170/127/clc-rprt/menu-eng.html


Cheers


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## OhGreatGuru (May 24, 2009)

Or get a T1 General tax return from your nearest postal outlet while they are still available, and work it out.


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## caricole (Mar 12, 2012)

OhGreatGuru said:


> Or get a T1 General tax return from your nearest postal outlet while they are still available, and work it out.


Or print it and fill it out

http://www.cra-arc.gc.ca/formspubs/t1gnrl/llyrs-eng.html

Dont forget schedule 3....


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## Square Root (Jan 30, 2010)

I don't mean to seem unkind, but it surprises me that someone would get 56 posts in and not know this most simple question? Anyway, I'm glad we could be of help and the forum is obviously such a welcoming, non-threatening place.


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## Eclectic12 (Oct 20, 2010)

Square Root said:


> I don't mean to seem unkind, but it surprises me that someone would get 56 posts in and not know this most simple question? Anyway, I'm glad we could be of help and the forum is obviously such a welcoming, non-threatening place.


*grin* - I guess it depends on what threads one is starting or responding to.

IAC, while getting a paper copy or filing out the online copy also works - I'm partial to the software or Excel spreadsheet as one can play with the numbers without needing an eraser!

Though if one is learning, the paper forms might be clearer. Another good idea is to stop by the library and borrow a tax book that walks through the various investment tax calculations/reporting.

The web links are great but can be a little short on detail or a bit piece meal for a novice.

... just my 2 cents ... about to be rounded to 5 cents as the penny disappears.


Cheers


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## OhGreatGuru (May 24, 2009)

Square Root said:


> I don't mean to seem unkind, but it surprises me that someone would get 56 posts in and not know this most simple question?..


Don't know how he adds up to 56 posts. I did a search, and found 11 on the subject of how to cook a roast, 5 on what to advise his father in investing; plus this thread. 

In any case, sounds like a newbie to investing. His question may be theoretical. And if he has never had any capital gains to report, he may never have had to fill in a T1 General or a Schedule 3.


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## OptsyEagle (Nov 29, 2009)

I didn't think there was anything wrong with the question. I would suspect that his ability to even think of asking the question would put his tax knowledge above about 60% of all Canadians.


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## caricole (Mar 12, 2012)

OptsyEagle said:


> I didn't think there was anything wrong with the question..


I also found the question perfectly normal for someone who never declared a capital gain on his income

As for the «SENIORS» who could not find his interventions on other things than «ROAST» I saw some of his interventions on «ESTATE» situations «Long-term care» situations etc

The number of interventions does not determine the knowledge of any subject on any post

caricole is a «NEWBE» to but sometimes if you do not know the background of a participant, I find it wise not to comment or suggest on any other subject than the question or the post itself:02.47-tranquillity:


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## CanadianCapitalist (Mar 31, 2009)

Oh and just to add some more complexity, if you had net capital losses in previous years, you can claim it in Line 253 of T1 General. You can find net capital losses in the letter accompanying your notice of assessment. Note that capital losses from previous years will reduce your taxable income but not your net income, which is used to calculate transfer payments such as child tax benefits, HST credit etc.


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## praire_guy (Sep 8, 2011)

Wow. I didn't appreciate a couple posts, since the question was answered, and it seems I was made out to be an idiot. Maybe I am reading too far into it. Anyway.......

Yes I am pretty new, although getting the hang of things. 

No, I have never had any capital gains. The subject came up at a familly dinner, and some people thought tax was calculated on earned income, and others thought it was total income, with the logic that capital gains don't count for rsp room, so they don't for it's own tax. 

Any way, as stated I got a headache from craa info and put it out there. 

To those who answered, thank you. To those who responded to question my intelligence, if you can't say something nice, why say anything?


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## Eclectic12 (Oct 20, 2010)

praire_guy said:


> Wow. I didn't appreciate a couple posts, since the question was answered, and it seems I was made out to be an idiot. Maybe I am reading too far into it. Anyway.......
> 
> Yes I am pretty new, although getting the hang of things.
> 
> ...


Don't take it too personally - I think part of the confusion is that a lot of people posting are focused on investing and have already had CG or CL so the wording looks strange. IAC, most of what could be seen as negative in this thread is quite mild compared to some other boards I've read from - so don't let a few stop you from asking.

If you haven't had any CG before, the sticky "How Investment Taxes Work" has some good links. 

Though, the links are focused on investing and assume one knows that the CG (or CL) is typically calculated on Schedule 3 of the tax return, with the final total "Taxable Capital Gains" on line 199 being transferred over onto page 2 of the T1 form, line 127. This is summed in line 150, "Total Income".

Then deductions such as RRSP contributions and charitable donations are subtracted from the "Total Income" to calculate line 234, "Net Income before adjustments". The Fed and Provincial tax calculations seem to be driving off of this line. Several more deductions are summed then subtracted to calculate on line 260, "Taxable Income".

If you download the 2010 tax spreadsheet at
http://peeltech.ca/mytax/register2010.html
Then plug in $10,000 in capital gains on excel tab marked "Sch3", under "Publicly Traded shares, mutual fund units ..." section, you'll see that Schedule 3, line 197 "Total CG (or CL)" is $10K, while line 199 "Taxable CG" is $10K.

Switch over to the tab marked "T1 GEN-2-3-4", where
line 127 - $5K
line 150 - $5K
line 234 - $5K
line 260 - $5K

Now the personal exemptions plus how low the CG is means there is no tax payable as there is no other income. This is probably not a realistic situation but hopefully it will make clear how the CG numbers are reported.

When you are clear on CG, you can plug in $20K of income on the "T4" tab. If you check just the $20K of income with a CG, the tax bill is $1843.43 and then if you add in the $10K CG, the tax bill is $3145.93, so that the CG has added $1302.5 in taxes.


Cheers


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## cardhu (May 26, 2009)

I concur, don't take it too personally, even though the comments in question were entirely uncalled for. 




Eclectic said:


> deductions such as RRSP contributions and charitable donations are subtracted from the "Total Income"


Donations generate a credit, not a deduction. The quirk about donations, though, is that while most credits are worth less than deductions, the donations credit can in many cases be worth more than a deduction.


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## Square Root (Jan 30, 2010)

I guess I was feeling a little cranky that day, sorry.


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## OhGreatGuru (May 24, 2009)

caricole said:


> ...As for the «SENIORS» who could not find his interventions on other things than «ROAST» I saw some of his interventions on «ESTATE» situations «Long-term care» situations etc
> 
> ...


Either there was somethkng wrong with the search engine, or with the criteria I put in (although I repeated the search several times). But now I can find lots more posts by OP.


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## Eclectic12 (Oct 20, 2010)

cardhu said:


> [ ... ]
> Donations generate a credit, not a deduction. The quirk about donations, though, is that while most credits are worth less than deductions, the donations credit can in many cases be worth more than a deduction.


It wouldn't be taxes if there weren't quirks ... :rolleyes2:




Square Root said:


> I guess I was feeling a little cranky that day, sorry.


Maybe ... but then again, I haven't seen a lot of cranky posts on other boards that start ".. I don't mean to be unkind ...". Usually it's far worse!

A large part of the problem is that usually there's facial expressions plus non-verbal communication to set the tone. With electronic posts, a lot of that context is missing. 


IAC, it's good that the question has been answered and hopefully everyone is still willing to ask questions and respond.


Cheers


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