Adjusted Cost Base

Understand adjusted cost base in Canadian real estate - how to calculate it, what it includes, and why it’s essential for minimizing capital gains tax.

Adjusted Cost Base



What is Adjusted Cost Base?

Adjusted cost base (ACB) is the total amount paid to acquire a property, adjusted for expenses and improvements, used to calculate capital gains when the asset is sold.

Why Adjusted Cost Base Matter in Real Estate

In Canadian real estate, ACB determines the taxable capital gain on a property sale. It includes the original purchase price plus certain legal fees, renovation costs, and other eligible expenses.



Adjustments to the cost base may include:
  • Purchase price
  • Legal and appraisal fees
  • Property improvements (e.g., additions, capital renovations)
  • Selling expenses (e.g., commissions)



Accurately calculating ACB helps reduce tax liability and ensures compliance with Canada Revenue Agency (CRA) rules.



Understanding ACB is critical for investors, landlords, and homeowners selling secondary properties or rental units.

Example of Adjusted Cost Base in Action

After selling a rental property, the owner calculates the adjusted cost base by adding $20,000 in renovation costs and $5,000 in legal fees to the original purchase price.

Key Takeaways

  • Determines capital gains on property sale
  • Includes purchase price and improvements
  • CRA requires accurate tracking
  • Affects investor and rental property taxes
  • Reduces taxable profit when properly calculated

Additional Terms

Sellers' Market

A sellers' market occurs when demand for real estate exceeds available supply, giving sellers more negotiating power and often leading to higher. more

Special Assessment

A special assessment is a one-time fee levied on condominium owners to cover unexpected or underfunded major repairs, upgrades, or emergencies.. more

Environmental Assessment

An environmental assessment is a formal process used to evaluate the environmental impacts of a proposed real estate development or land use change.. more

Condominium Bylaws

Condominium bylaws are the rules and regulations set by a condo corporation that govern how residents, owners, and the condominium board must use and. more

Building Maintenance

Building maintenance refers to the routine upkeep, repair, and inspection of a property’s systems and structure to preserve functionality, safety,. more

Tenant Rights

Tenant rights refer to the legal protections and entitlements that tenants have under provincial residential tenancy laws in Canada.. more

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