1. What Is Adjusted Cost Base?

The Adjusted Cost Base (ACB) is the total cost of a property including purchase price, closing costs, and improvements, minus any depreciation. It represents the true cost basis for capital gains tax calculations when selling real estate.

2. How Does The Calculator Work?

The calculator uses the ACB formula:

Where:

• Purchase — Original purchase price of the property
• Closing Costs — Legal fees, land transfer taxes, and other acquisition costs
• Improvements — Capital improvements that add value to the property
• Depreciation — Capital cost allowance claimed on the property

Explanation: The ACB calculation accounts for all costs associated with acquiring and improving the property, adjusted for any depreciation claimed for tax purposes.

3. Importance Of ACB Calculation

Details: Accurate ACB calculation is essential for determining capital gains or losses when selling real estate, which directly impacts tax liability and financial planning.

4. Using The Calculator

Tips: Enter all amounts in dollars. Include all legitimate closing costs and capital improvements. Ensure depreciation amounts reflect actual capital cost allowance claimed.

5. Frequently Asked Questions (FAQ)

Q1: What costs can be included in closing costs?
A: Legal fees, land transfer taxes, title insurance, mortgage application fees, and other direct acquisition costs.

Q2: What qualifies as a capital improvement?
A: Major renovations that add value or extend useful life, such as kitchen renovations, room additions, or foundation repairs.

Q3: How does ACB affect capital gains tax?
A: Capital gain = Selling price - ACB. A higher ACB reduces taxable capital gains.

Q4: Can maintenance costs be included in ACB?
A: No, routine maintenance and repairs are operating expenses, not capital improvements.

Q5: Is ACB different for rental properties?
A: The calculation is similar, but depreciation (CCA) is typically only claimed on rental properties, not principal residences.