How to Calculate Adjusted Cost Base (ACB) in Canada
Your adjusted cost base (ACB) is the foundation of every capital gains calculation. Get it right and you pay exactly what you owe. Get it wrong and you either overpay — or underpay and risk a CRA reassessment.
What is the ACB?
The ACB is essentially the tax cost of your property — the amount you subtract from the selling price to calculate your capital gain.
Capital gain = Proceeds of disposition − Selling costs − ACB
For most people, the ACB is straightforward: it's what you paid for the asset, including the costs to acquire it. But there are several situations where the ACB becomes more complex.
ACB for stocks (single purchase)
If you bought 100 shares of a company at $45 per share and paid a $10 commission, your ACB is:
ACB = (100 × $45) + $10 = $4,510
ACB per share = $4,510 ÷ 100 = $45.10
When you sell, subtract the total ACB from your net proceeds to get the capital gain.
ACB for stocks (multiple purchases — the identical properties rule)
This is where most investors make mistakes. The CRA treats all shares of the same security as identical properties — you cannot choose which specific shares you're selling. Every purchase changes the ACB of all your shares.
The formula after each new purchase:
New ACB per share = (Previous total ACB + New cost including commission) ÷ Total shares held
Example — three purchases:
| Purchase | Shares | Price | Commission | Total cost |
|---|---|---|---|---|
| Buy 1 | 100 | $40 | $10 | $4,010 |
| Buy 2 | 50 | $50 | $10 | $2,510 |
| Buy 3 | 75 | $55 | $10 | $4,135 |
| Total | 225 | $10,655 |
ACB per share = $10,655 ÷ 225 = $47.36
When you eventually sell 100 shares at $65 each:
- Proceeds = $6,500 − $10 commission = $6,490
- ACB of 100 shares = 100 × $47.36 = $4,736
- Capital gain = $6,490 − $4,736 = $1,754
Use the ACB calculator to track multiple purchases automatically.
ACB for real estate
For real estate, the ACB includes:
- Original purchase price
- Legal fees and land transfer taxes paid at purchase
- Real estate commissions paid to buy
- Capital improvements (additions, renovations that add lasting value)
What is NOT included in the ACB:
- Mortgage interest
- Property taxes
- Maintenance and repairs
- Property management fees
Capital improvements increase your ACB — reducing your eventual gain. Keep all renovation receipts.
Reinvested dividends (DRIP)
If you participate in a Dividend Reinvestment Plan (DRIP), the reinvested dividends are included in your income in the year received and simultaneously added to your ACB. This prevents double taxation when you eventually sell.
Each DRIP share has an ACB equal to the amount of dividend that was reinvested. Add these amounts to your running ACB total.
Return of capital (ROC)
Distributions from certain funds (ETFs, REITs, mutual funds) may include a return of capital component. Unlike dividends, ROC is not immediately taxable — instead, it reduces your ACB by the ROC amount. A lower ACB means a larger capital gain when you sell.
If you ignore ROC adjustments over many years, you'll overstate your ACB and accidentally underpay tax. Your fund company reports ROC on the T3 slip in Box 42.
ACB adjustments after a stock split
After a forward stock split, divide the existing ACB by the split ratio to get the new ACB per share. The total ACB does not change.
Example: You hold 100 shares with a total ACB of $5,000 ($50/share). The company does a 2-for-1 split. After the split: 200 shares, ACB still $5,000, new ACB per share = $25.
The superficial loss rule
If you sell shares at a loss and then buy back the same security within 30 days before or after the sale, the CRA denies the capital loss — it's a "superficial loss." The denied loss amount is added back to the ACB of the repurchased shares. It is not permanently lost; it is deferred until you eventually sell the repurchased shares.
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