What is an adjusted cost base (ACB)?
To calculate a capital gain or loss, you must know your investment’s ACB. Here’s the formula for adjusted cost base.
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The adjusted cost base (ACB) of an investment is the cost used to calculate your capital gain or capital loss for tax purposes. ACB represents the total cost of the security, including commissions and certain other costs. For example, if you buy 10 shares of a $20 stock for $200 and pay a $19 commission, your ACB is $219. Note, however, that for real estate such as secondary residences or rental income properties, the ACB does not include current expenses (e.g., maintenance and repair costs).
ACB = Investment-related costs + cost of the investment
Calculating your adjusted cost base is more complicated for shares acquired through dividend reinvestment plans (DRIPs) or corporate actions like stock splits. These occurrences change your ACB for a stock, so you’ll need to keep track of the timing, the number of shares and the value of each transaction.
Example: “Because the Canada Revenue Agency requires taxpayers to report in Canadian dollars, investors who trade in U.S. or other foreign-denominated securities should keep track of their adjusted cost base in Canadian dollars on the date of each transaction.”
Read more on ACB:
- Calculating expected returns on the sale of real estate
Yan is selling his home and wants to know how to price it to ensure he turns a profit. - Calculating adjusted cost base: A case study
Calculating your ACB is not necessarily easy, but taking the time to do it properly could save you a significant amount of money. - Calculating your adjusted cost base with ETFs
Being a DIY investor is easy when all your accounts are tax-deferred. As the April 30 tax deadline approaches, pretty much all you need to do is gather your RRSP contribution slips. But if you have non-registered accounts, things are more complicated, even if you’re a Couch Potato who uses ETFs and index funds. - How to calculate the taxable amount for a cashed-in whole life insurance policy
Is a whole life insurance cash value taxable? Spoiler: Yes. But find out how to calculate the taxable amount. - Calculating the tax on rental property sales when reno receipts are missing
Is there a reasonable amount CRA will accept for repairs without receipts?
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