By admin 
As a professional appraiser, I’ve seen firsthand how accurate, certified valuations can help Canadians save thousands legally and confidently. Here, I’m breaking down why (and when) it’s a smart idea to get one.
How capital gains are calculated on Canadian real estate
Capital gains are the profit earned from the sale of a capital asset—like real estate—when the sale price exceeds the property’s adjusted cost base (ACB) plus any associated expenses (e.g., legal fees, commissions, renovations). In Canada, 50% of this gain is taxable, and you must report it on your personal income tax return.
Capital gains tax does not apply to the sale of your principal residence, as long as it was your principal residence for the entire time you owned it.
Let’s look at an example: If you purchase a rental property for $400,000 and later sell it for $650,000, your capital gain is $250,000. After deducting eligible expenses (say, $50,000), you would need to add $200,000 to your taxable income for the year.
The challenge arises when the ACB is unclear or underestimated, which is often the case with inherited properties or those that have undergone significant changes. This is where a certified property appraisal becomes essential.
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When you need a retrospective appraisal
A retrospective appraisal determines the value of a property as of a previous date, and this is critical for tax reporting. Situations that require this type of appraisal include:
- Inherited property: The value of the property on the date of the owner’s death becomes its new cost base for the beneficiary. Without proper valuation, you risk overstating capital gains when you sell it later.
- Former principal residence: If a property was your primary residence for part of the ownership period but later became a rental or investment property, a valuation at the time of change in use helps establish the correct ACB.
- Major renovations or additions: Improvements that significantly enhance property value (e.g., additions, basement finishing) should be documented with a certified appraisal to support cost base adjustments.
What the CRA requires—and why certified appraisals matter
The Canada Revenue Agency (CRA) does not mandate that you use a certified appraiser, but when your numbers are reviewed or challenged, a formal appraisal is one of the strongest pieces of evidence you can provide.