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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 another stock, your rate of return would need to be about 6.44% to have the same after-tax proceeds in 10 years. In other words, you would........

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