When you make a profit from selling a small business, a farm property or a fishing property, the lifetime capital gains exemption (LCGE) could spare you from paying taxes on all or part of the profit you’ve earned. For example: You sell shares of a small business in 2021 and turn a profit of $500,000.

How do I get capital gains exemption?

Exemption under Section 54F is available when there are capital gains from the sale of a long-term asset other than a house property. You must invest the entire sale consideration and not only capital gain to buy a new residential house property to claim this exemption.

How to qualify for a lifetime capital gains exemption?

Lifetime capital gains exemption eligibility 1 Your small business is incorporated 2 The majority of your business has been active in Canada for two years before the sale 3 The shares are owned by you or someone related to you in the two years before the sale

What kind of property is exempt from capital gains tax?

There are three types of property that can give rise to the capital gains exemption: The first is the sale of Qualified Small Business Corporation shares. These are shares in a private company that operates an active business and is owned, in majority, by Canadians. You or someone related to you must have owned the shares for at least 24 months.

How are capital gains exempt from section 54F?

Section 54F – Proceeds earned through the sale of capital assets besides a residential housing property. Capital gains accrued through the sale of an asset other than property used as a residence would be entitled to capital gains exemption, given the proceeds were reinvested in a residential property.

How much capital gain can I exclude from my tax return?

If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse.