Hello,
I own a house in Canada that is currently rented. I am currently in Japan on my Spousal Visa. If I decide to stay in Japan for long term , I will eventually look to sell it.
- Canada has benefits when you sell your primary residence, I.e. you don’t pay a capital gains tax for the period the house was your primary residence,
- Also, in Canada, only 50% of Capital gains are taxed. So, 50% of your capital gains are added to your income and taxed based on your regular income tax bracket.
- For example, I bought my house for $900,000 in 2016; I lived in it till 2024, when the house's value was assessed at $1,200,000 and let's assume I eventually sell it in 2028 for $1,500,000. In this case, I pay no taxes on the first $300,000 ($1,200,00 – $900,000) as the house was my primary residence during this period. On the next $300,000 ($1,500,000 – $1,200,000), 50% of that amount is included in my income for 2028. Assuming I had no other income that year in Canada, as I will be in Japan, I will only pay taxes on $150,000 in Canada as a Non-Resident.
- How will this transaction and Capital gain be treated within the 5-year expedition and outside the 5-year exemption? If I know by 2027-ish that Japan is where I want to stay with my family, is there any benefit to selling my house before the 5-year exemption expires, and what/how much is that benefit
- Also, I could put a portion of the taxable capital gain into my RRSP(Canadian iDeco), which will further reduce my taxes in Canada. How will Japan treat this situation within and after the 5-year exemption (assuming I don't have to pay taxes in Japan on Capital gains if I sell within 5 years)?
- Canadian non-residents are taxed at a flat 25%. Let's say I sell after five years and have to pay taxes on it; how will the tax treaty work? Since Japan's capital gains tax is around 20%, and Canada will give me a credit on my paid taxes, will that mean I don't pay taxes on my capital gains in Japan?
by BrownSugar20