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

June 06, 2025


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

Related Terms

Additional Terms

Budgeting

Budgeting in real estate refers to the process of forecasting and managing income and expenses associated with owning, operating, or developing a property.. more

Tenant Improvements

Tenant improvements refer to custom modifications or build-outs made to a leased space to suit the tenant’s operational needs, often negotiated as. more

Highest and Best Use

Highest and best use refers to the reasonably probable use of a property that results in the highest value, provided it is legally permissible,. more

Gross Lease

A gross lease is a commercial lease where the tenant pays a fixed rent, and the landlord covers most or all operating expenses such as property. more

Brownfield

A brownfield is a property that was previously used for industrial or commercial purposes and is now vacant or underused, often requiring. more

Record of Site Condition (RSC)

A Record of Site Condition (RSC) is a formal document filed with a provincial environmental authority certifying that a property meets required. more

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