Capital Gains...how much would someone owe.?

If someone sells a rental property or a property their children lived in, and they make a profit of 85,000 but still have $45,000 in debts (reno costs, realtors fees, debtload etc) would they only claim the excess $40,000 they have left in pocket? I heard that the governemt only taxes you 50% of the gain...and out of that 50% ...what is the percentage the government takes from you???? Someone please Help.

Assuming that you rented the property to your children to live in (ie, not a principal residence to qualify for tax exemption), and assuming that the debtload is $5000 representing interest expenses deductible as rental expenses, your profit would be $35000 (because the reno costs and realtors fees are considered as costs of disposition for your rental property.

50% of $35000 would be subject to considered as your taxble capital gain if your are not considered as a builder or developer with a habit of selling rental property. Otherwise, the whole $35000 would be your profit. If you have no other income and if u live in Ontario, the combined fed and ontario tax is about $21% for income under $36,000. Here is the link for the tax rates for other provinces:
http://www.taxtips.ca/marginaltaxrates.h...

Sounds as though you need an accountant (briefly) to sort this out. From the sounds of it, you made nowhere near $85,000 in profit.

A quick try. Suppose you bought the property for 200,000 plus 5000 in commission.
You spent $20,000 fixing it up.(wiring plumbing etc) I would treat those costs as part of the cost although some might argue they are current expenses.
To cover this you used $100,000 of your own cash and borrowed the balance $125,000.

Now suppose you rented the property and collected rent say
1000 a month. Mortgage payments(principal and interest were 800. Taxes insurance and utilities were another 500

After 5 years you sold it. for $285,000 less 5000 commission
The balance on the mortgage is $45,000

So 2 tax issues . Taxable income from rent is current revenue less on going expenses less mortgage interest only.

Now are you in real estate business? Probably not

Capital gain then is proceeds less commission less cost base of $225,000 Mortgage owing has nothing to do with this

This is quick and dirty but it could be worth it to you to take all your receipts over to an accountant to make determination. It could be the best money you ever spent.