The Welcome Tax is not immediately tax deductible, rather it is added to the Adjustable Cost Base (ACB) of the investment you have purchased. The tax deduction is only realized upon deposition of your property where the ACB of the investment was increased by the amount of Welcome Tax which was paid during acquisition.
- Buying a home for $500,000 would equal ~$6,000 of Welcome Tax incurred when acquiring the property.
- The ACB of the property would have increased to $506,000.
- When you sell your property, the Welcome Tax will be part of your ACB and ultimately offset the final amount of capital gains payable. If you sold 1 year later, for $516,000, the capital gains subject to tax would be the difference between your ACB and final sold price ($10,000).