Unfortunately, there's no age limit to paying capital gains tax. However, you can manage and even reduce your tax burden with the right strategies and information. Here are the basics about capital gains tax rules and rates as well as some tax-saving tactics.
An easy and impactful way to reduce your capital gains taxes is to use tax-advantaged accounts. Retirement accounts such as 401(k) plans, and individual retirement accounts offer tax-deferred investment. You don't pay income or capital gains taxes on assets while they remain in the account.
Bottom Line. The IRS allows no specific tax exemptions for senior citizens, either when it comes to income or capital gains. The closest you can come is contributing to a Roth IRA or Roth 401(k) with after-tax dollars, allowing you to make qualified withdrawals on a tax-free basis.
A stepped-up basis is a tax provision that allows heirs to reduce their capital gains taxes. When someone inherits property and investments, the IRS resets the market value of these assets to their value on the date of the original owner's death.
A few options to legally avoid paying capital gains tax on investment property include buying your property with a retirement account, converting the property from an investment property to a primary residence, utilizing tax harvesting, and using Section 1031 of the IRS code for deferring taxes.
Age amount – non-refundable tax credit up to $8,790 per year if you are 65 and older. Pension income splitting – you may be able to split your eligible pension income with your spouse or common-law partner to reduce any income tax you owe.
Taxes aren't determined by age, so you will never age out of paying taxes. People who are 65 or older at the end of 2024 have to file a return for tax year 2024 (which is due in 2025) if their gross income is $16,550 or higher.
Here's how it works: Taxpayers can claim a full capital gains tax exemption for their principal place of residence (PPOR). They also can claim this exemption for up to six years if they move out of their PPOR and then rent it out. There are some qualifying conditions for leaving your principal place of residence.
You can avoid capital gains tax when you sell your primary residence by buying another house and using the 121 home sale exclusion. In addition, the 1031 like-kind exchange allows investors to defer taxes when they reinvest the proceeds from the sale of an investment property into another investment property.
If it's your primary residence
You can sell your primary residence and avoid paying capital gains taxes on the first $250,000 of your profits if your tax-filing status is single, and up to $500,000 if married and filing jointly. The exemption is only available once every two years.
5 Ways to Get Tax-Free Retirement Income
Roth IRA or Roth 401(k) – Roth IRAs and Roth 401(k)s have tax-free qualified withdrawals at retirement since taxes are paid on contributions. Municipal Bonds Income – A fixed-income investment that generates interest payments that are typically exempt from federal taxes.
The proceeds from a home sale can be used in a variety of ways. With up to $500,000 available tax free, you could use the money to make a down payment on another home, pay down problematic debt, increase your stock portfolio or implement strategies to improve your retirement plan.
The $1,200 payment is an inflation relief measure provided by the Canada Revenue Agency (CRA) to help senior citizens cope with the financial pressures of rising prices. This payment is in addition to the regular OAS benefits that eligible seniors receive.
Over 65 additional standard deduction for 2025
For single filers and heads of households age 65 and over, the additional standard deduction will increase slightly — from $1,950 in 2024 (returns you'll file soon in early 2025) to $2,000 in 2025 (returns you'll file in early 2026).
This refundable tax credit is worth 25% of the cost of your renovations. You can claim up to $10,000 for your expenses, meaning the highest refund you can get is $2,500.
For corporations and most trusts, 66.67% of capital gains realized on or after June 25, 2024 would need to be included in income for tax purposes (up from 50%). For individual taxpayers, the increased rate would only apply to the portion of capital gains that exceed $250,000.
One of the easiest ways to avoid paying taxes on capital gains is to hold your investments in a registered account, such as a registered retirement savings plan (RRSP), tax-free savings account (TFSA), first home savings accounts (FHSA) or registered education savings plan (RESP).
Since January 1, 2023, Canada's residential property flipping rule provides a straight answer. To avoid the Canada Revenue Agency (CRA) treating gains from the sale of a residential property as fully taxable business income, you must live in your principal residence for more than 365 days.
Yes. Home sales can be tax-free as long as the condition of the sale meets certain criteria: The seller must have owned the home and used it as their principal residence for two out of the last five years (up to the date of closing). The two years do not have to be consecutive to qualify.
Canadians can avoid capital gains tax by using Tax-Free Savings Accounts (TFSA), deferring asset sales to lower-income years, claiming capital losses to offset gains, and donating appreciated assets to charity. If you inherit real estate, you do not need to pay capital gains tax if it was a primary residence.