FIGURING TAX ON DUPLEX SALE

The tax implications of a duplex sale and eligibility for Quebec’s shelter allowance were among the topics raised in the latest batch of reader letters. Here’s what they wanted to know, writes

Q:

“Since 1971, I own a duplex in St-Léonard where I live downstairs and rent out the upstairs. How do I calculate the capital gains tax when I sell?” A In a nutshell, you’ll be taxed on the appreciation in value of the upstairs unit since 1972. (Capital gains were not taxed prior to 1972). The downstairs unit you live in will be covered by the principal-residence exemption (assuming you didn’t claim it already for another property). The difference between the duplex’s worth in 1972 (probably about the same as what you paid in 1971) and the price you get when you sell it will be the overall capital gain. Half of that (representing your unit) is cancelled by the principal residence exemption. The remaining 50 per cent is partially taxable as a capital gain. The capital gains inclusion rate is 50 per cent. So if you bought duplex for $50,000 and sold it for $500,000, the taxable portion of the disposition will total $117,500 (with the actual taxes paid dependant on your overall income for the year). The number could be lower if you made renovations to the upstairs unit that boosted its initial cost. Q “In July, the federal government increased the maximum Guaranteed Income Supplement (for low-income seniors) by about $80 a month. When added to Old Age Security (OAS), it can now total as much as $864.09 a month or $17,544 annually. But

maximum annual income to qualify for Quebec’s shelter allowance is $16,480 a year. Seniors who receive the GIS maximum therefore would no longer qualify for the provincial shelter allowance, which is also $80 a month. Isn’t this a case of one government effectively taking away what another one has given?” A Not exactly. That’s because there’s a lag in how Quebec makes its calculations for the shelter allowance (which is a maximum of $80 a month, not $80 a month in all cases). Provincial shelter allowance payments are made in a one-year cycle that begins in October and runs through September, and based on the income totals reported by individuals on the previous year’s provincial tax return. So eligibility for payments that began last month and run through September 2017, were determined by the 2015 tax return. This summer’s change in the federal GIS payments will change nothing for shelter-allowance recipients for at least eight more months. Also, the full impact of the change to GIS payments won’t be reflected on 2016 income-tax returns, because the increase only covered half a year, and Quebec is likely to at least index its shelter-allowance thresholds for the 2016 tax year. The Montreal Gazette invites reader questions on tax, investment and personal-finance matters. If you have a query you’d like addressed, please send it to Paul Delean, Montreal Gazette Business Section, Suite 200, 1010 Ste-Catherine St. W., Montreal, QC, H3B 5L1, or by email to pdelean@postmedia.com