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Paying taxes on a half-million-dollar capital gain from a cottage or an investment property is a good problem to have
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Couldn’t read the paywalled article, but most of the commentary on social media seems to be people that completely misunderstand how their taxes on capital gains are calculated, like thinking the inclusion rate is how much tax is paid, or think that paying capital gains on a secondary property is a new thing. Really it’s paying around 8% more in taxes on the gain over $250k. Some think they’re getting taxed on the whole sale price, not just the increased value, some seem upset that they’re taxed on the “investment” that was bought with after tax dollars(even though capital gains is taxed lower than things like a regular investment account). Some think it’s somehow unfair to pay the capital gains on what they consider their retirement plan, even though they have the same option to put those gains into an RRSP to shelter it from taxes, they’re paying a lower inclusion rate than regular income.
One thing that seemed to come out that didn’t change much and seems a big deal to some, is if you want to pass the property to next of kin, make sure your estate is sitting on 25% of the increased value of the property to cover capital gains, or use a trust and pay the gains up front(though this just puts it off so the kids pay more gains to pass it to their kids) before it hits the estate.
Somehow I got lucky and the paywall disappeared on refresh. My takeaway was that we should make the capital gains on investment real estate (I’m assuming anything other than principal residence) be taxed at a 100% inclusion rate. Part of the reason is that most of the people seeing these gains are at the age where they’re starting to require a higher share of government spending while earning less from employment, so it’s reasonable for them to pay closer to their share of taxes.
Need to be middle class to read the article…
Duh. I’m very much in the top 5% of annual wage earners in the country, and there’s no way I could afford a decent cottage (i.e., where I can’t see or hear my neighbours).
I have some great memories as a kid enjoying the cottage with the neighbouring cottage kids. What you want sounds more like a remote hunt/fishing camp.
When I was a kid, we had a cottage in the forest. My uncle owned about a 1km stretch of river-front property that he got for nearly nothing. The idea was to go there to get away from everyone in the city and just be a family. If you wanted to be social, you went into town or the local park.
im from the us but one thing that gets me is having a rustic vacatio place was a cornerstone of middle class when I was young. if not that then regular vacations that cost a fair amount. families either did one or the other (invested more for the long term or enjoyed more variety but with no long term investment return). nowadays it feels like doctors and lawyers have a hard time swinging this.
Ah. I think I’m top-ten, but we’re renters. So that’s the window where people improving their economic spot need to reach – you need to be top 5% to own a home without buying-in 20 years ago, and above that to own a vacation home.
Contrast that with a nation so heavily-taxed like Sweden where 50% of the country seems to own a cottage AND a small boat.
Having moved here from Sweden (and having just returned from a trip to Sweden) that 50% number is highly inaccurate when measured against the entire population. Swedes these days find themselves very much in a similar rent/purchase crunch we see in Canada, with most young people struggling to find affordable housing. The generation that owns those cottages and boats are the older Millenials, Gen Xers and Boomers, generally speaking.
The older millennials are not really all that old. Early 40s?
Yeah, that’s about right. Even so, I’d wager the majority of people owning a cottage or boat are older than the millennial generation.
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It really depends where you live. In northern Ontario, many working class people have a small cabin on a lake. It may be a plywood shack or log cabin, may lack plumbing and electricity, and may be a two or three hour drive into the bush on logging roads, but it’s affordable. If you want a second suburban-style home with all the amenities on an easily accessible lake, well yeah, no shit that’s going to be really expensive.
You can have a “vacation home” or a “yacht” and have it be middle-class affordable if you keep it small and away from the most expensive parts of the country.
It WAS affordable. Even now these lots are costing more than what a house did a few years ago. I service a lot of these rural hunt camps and cabins and ones purchased recently have numbers in the 250,000-500,000 range for a shack that needs repairs sitting on an acre 45 minutes down a dirt road.
Interesting, thanks. Forty-five minutes down a dirt road sounds like a dream. Ours is 1.5 hours down the highway, then 1 hour on logging roads, and the final leg is a good half-hour by boat through a labyrinth of narrow channels. No road access and no services. The log cabin is a Wendall Beckwith design so it looks cool, but my wife’s father didn’t take good care of it so it leaked quite a bit before I put a metal roof on it. (That was fun with boat access and a small generator only capable of running a jigsaw, let me tell you.) We have an open invitation for any of our friends that want to use it and no one ever takes us up on it, so I suspect it will still be quite affordable for someone, if we ever decide to sell it.
Rather than devalue the term middle class, tell people they are lower class so they get angry about what has been stolen from them
This is the best summary I could come up with:
Some in cottage country have been singing the blues since Ottawa proposed changes to capital gains taxation as part of the recent federal budget.
More, not less, taxation of second properties is required to protect younger Canadians in the housing market, fill the revenue hole left by governments that did not plan adequately for boomers’ retirement, and spur productivity.
I genuinely sympathize when people struggle to ensure that a cherished cottage remains in the family, and I appreciate that taxation plays a role in complicating their planning.
Social Capital Partners, a non-profit focused on broadening access to ownership, rightly calls out this problem, lamenting the role that domestic, small-scale investors have played in crowding-out first-time buyers.
Canada could “make upward of a million [homes] available over the next decade” for aspiring owners, SCP observes, if we reduce the activity of investors in the housing system to levels that resemble their share of purchases 10 years ago – “all with no additional shovels.”
Since those profits are sheltered from taxation by comparison with labour earnings, the SCP proposal would reduce the tax advantage that helps investors outbid first-time buyers.
The original article contains 767 words, the summary contains 188 words. Saved 75%. I’m a bot and I’m open source!
Yea you gotta own both now
