Selling something personally? Beware: There might be taxes to pay
Generally speaking, most people consider selling something they personally own as non-taxable. It does make sense, after all, you purchased that item with money that you already paid taxes on when you earned it. However, the CRA doesn’t always see it that way for some items, called “personal use property” and “listed personal property”. Personal use property includes cars, boats, furniture or cottages. Listed personal property is a type of personal use property which can commonly gain in value. These would include items such as coins, rare books, works of art, jewelry or other such items.
If you sell either personal use property or listed personal property items for over $1,000, then you must include a capital gain on your personal income tax return. Fortunately, the CRA also imposes a minimum cost. If you purchased it for $800 and sold it for $1,300, your gain is only $300. If you purchased it for $1,100 and sold it for $1,300, then your gain would be $200.
There is also another downside. For business goods or assets, capital losses can be applied against capital gains to lower the taxes. For listed personal property, you can fortunately also report a loss that will lower your capital gains taxes. However, for personal use property, if you sell the item at a loss, you cannot claim any capital losses to lower your taxes.
Any instance of this occurring caught unreported by the CRA could result in penalties and interest. Depending on how far back the transaction occurred and the amount of the gain, this amount could be sizable. What it means is you must keep a record of the purchase price of these items for if and when you sell them later on because the onus is on you to track it.
Personal use property and listed personal property is a concept that is foreign and new to many Canadians. If you have questions or think that you may have some item that meets these criteria, please call your accountant or contact us today at (416) 495-1098 or info@apbs.ca!
