If you’re a business owner, you’ve probably heard of the lifetime capital gains exemption that can apply to the sale of qualifying private company shares. If you and your family members can claim this exemption when you sell the shares of your business, you could each realize substantial tax savings, provided that the shares you’re selling meet certain requirements. The capital gains exemption is a great way to save on taxes. But it is important that you ensure you know the rules before you try to claim it. With CPA4IT, you have nothing to worry about. Our decades of experience and extremely knowledgeable professionals will ensure that you claim these deductions properly.
Are you Eligible for Capital Gains Exemption?
Capital gains exemption is a great way to save on taxes. But there are a few things you should know before you try to claim it.
- Qualified small business corporation shares
This exemption only applies to gains from the sale of “qualified small business corporation shares”.
- Time Restriction
Even if you do own shares in a qualified small business corporation, you can only claim the exemption if you’ve held those shares for more than two years. So if you’re thinking of selling your shares to take advantage of the exemption, make sure you’ve held onto them for long enough first.
- Exempted Amount
Finally, there’s a limit on how much of your gain you can exempt. Every individual is entitled to a lifetime “capital gains exemption” on qualifying small business shares (and farm and fishing property). This exemption, which is indexed for inflation annually, is limited to $813,600 for 2021. So, if you sell shares of your business for more than the exemption amount, you’ll only have to pay capital gains tax on the portion of the sale that exceeds the exemption.
The lifetime capital gains exemption can be a valuable planning tool for business owners and their families. If you’re thinking of selling your business, or passing it on to your family, be sure to consult with CPA4IT’s financial experts about how the exemption can be used to minimize your tax liability.
Still not sure?
CPA4IT offers a range of services for business owners, including tax planning, bookkeeping, and financial statement preparation. We’re here to help you save time and money, so you can focus on running your business. Contact us today to learn more about how we can help you. For more information about how the exemption may apply to your situation, book a FREE consultation with one of our experts!