1. What is Adjusted Cost Base (ACB)?

The Adjusted Cost Base (ACB) is the cost of a property plus any expenses to acquire it, such as commissions and legal fees. For Canadian tax purposes, ACB is used to calculate capital gains or losses when you dispose of property.

2. How Does the Calculator Work?

The calculator uses the ACB formula:

Where:

• \( Purchase\ Price \) — The original purchase price of the property
• \( Commissions \) — Brokerage fees and commissions paid
• \( Improvements \) — Capital improvements made to the property
• \( Returns\ of\ Capital \) — Any returns of capital received

Explanation: The ACB represents the true cost of your investment and is used to determine your capital gain or loss for tax purposes when you sell the property.

3. Importance of ACB Calculation

Details: Accurate ACB calculation is crucial for determining capital gains tax liability. A higher ACB results in lower taxable capital gains, while a lower ACB increases your tax burden.

4. Using the Calculator

Tips: Enter all amounts in Canadian dollars. Include all acquisition costs and capital improvements. Ensure all values are positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is included in "Improvements"?
A: Capital improvements that add value to the property, such as renovations, additions, or major repairs that extend the property's useful life.

Q2: What are "Returns of Capital"?
A: Distributions that are considered a return of your original investment rather than income. These reduce your ACB.

Q3: How does ACB affect capital gains tax?
A: Capital Gain = Selling Price - ACB. Only 50% of capital gains are taxable in Canada.

Q4: Do I need to track ACB for all investments?
A: Yes, for all capital property including stocks, bonds, real estate, and other investments that can generate capital gains.

Q5: How often should I update my ACB?
A: Update your ACB whenever you make additional purchases, receive returns of capital, or make capital improvements to the property.