Capital Gains Tax When Selling a Multiplex

It is the question that holds back the most owners: “how much will tax take?” The answer is often less painful than feared, and almost always simpler when you work it out before setting your price. This guide explains the mechanism in plain language; it does not replace your accountant, who knows your situation.

The capital gain

The gain is the sale price minus what you paid, minus purchase and sale costs, minus major improvements over the years (roof, windows, extension — not routine maintenance). In Canada, half of that gain is taxable, added to your income for the year, federally and in Québec. A building bought for $600,000 and sold for $1,500,000 with $100,000 of improvements gives an $800,000 gain, of which $400,000 is added to your income.

Recapture of depreciation, the part people forget

If you claimed capital cost allowance on the building while you held it, the tax authorities take it back at the sale: all the depreciation claimed becomes income taxable at 100%, not 50%. On a multiplex held twenty years, that can exceed the tax on the gain itself. It is the line that surprises the most sellers at filing time.

A worked example

An 8-unit bought for $500,000 in 2006, sold for $1,600,000 in 2026, $80,000 of improvements, $150,000 of depreciation claimed. Capital gain: $1,020,000, of which $510,000 is taxable. Recapture: $150,000 fully taxable. Added taxable income that year: $660,000. At Québec’s top combined marginal rate (about 53%), tax approaches $330,000 — a little over 20% of the sale price. Sold through a broker at 5%, another $80,000 of commission comes off before you reach what you keep.

Five ways to keep more

1. Spread the sale: a vendor take-back (the buyer pays part of the price over several years) lets you spread the gain over up to five years and avoid the top marginal rate. 2. Document every improvement: each invoice found reduces the gain. 3. Sell in a year when your other income is low (retirement, sabbatical). 4. If the building is held in a company, compare selling the shares and selling the building with your accountant. 5. Pay no commission: 5% is $80,000 in this example, and it never comes back.

Before setting your price

Work backwards: the net amount you want to keep, plus estimated tax, plus costs. That is your floor. A direct offer with no commission gets you 4 to 6% closer to that floor than the same offer through a broker. Start by knowing what the building is worth today.

This guide is general information, not tax advice. Rules and rates change; confirm your situation with an accountant before selling.