Ask a Planner

By Jason Heath, CFP on July 22, 2025
Estimated reading time: 6 minutes

By Jason Heath, CFP on July 22, 2025
Estimated reading time: 6 minutes

Investors are sometimes reluctant to sell a stock because the capital gains tax will be substantial. Here are some considerations and solutions.

If you hold investments in a taxable non-registered account, then income tax considerations ought to be part of your investing decision-making process. Although capital gains tax rates in Canada are relatively low, with only 50% of a capital gain being taxable to an investor, the dollars of tax payable can grow large if an investment performs particularly well or if a stock is held for many years.

Here are five things you should think about when a capital gain could be significant, and some solutions investors can consider.

The break-even return is worth considering if you are on the fence about paying tax to sell an investment.

Imagine you own a stock that you purchased for $10,000 and is now worth $20,000. There is a $10,000 deferred capital gain. If we assume you are in a 35% marginal tax bracket, the tax payable on the sale of the stock would be $1,750.

That tax would be 8.75% of the sale price in this example. That is, $1,750 divided by $20,000 would disappear to tax. That means you would keep 91.25 cents on the dollar after tax, or $18,250 of the $20,000 sale proceeds.

If you did not sell the stock and it grew at 6% per year for the next 10 years, it would be worth about $35,817 pre-tax and $31,299 after-tax. For simplicity, this assumes the same 35% marginal tax rate for the entire capital gain.

If you sold today, paid the accumulated tax today, and then reinvested into........

© MoneySense