ACB (Adjusted Cost Base)
The Adjusted Cost Base (ACB) is the cost of an asset for tax purposes, used to calculate capital gains or losses when the asset is sold. The ACB starts with the original purchase price and is adjusted for acquisition costs, capital improvements, and return of capital distributions.
For publicly traded securities, the ACB is calculated using the average cost method: if you buy the same stock at different prices over time, the ACB per share is the total cost of all shares divided by the total number held. Brokerage commissions are added to the ACB when buying and subtracted from proceeds when selling.
For real estate, the ACB includes the purchase price, land transfer tax, legal fees, and the cost of capital improvements (a new roof, renovations that increase value) — but not routine maintenance. Tracking your ACB accurately is essential, as errors can lead to overpaying or underpaying capital gains tax.
Related Terms
Capital Gains
A capital gain arises when you sell a capital property — such as stocks, mutual funds, ETFs, real estate (other than your principal residence), or cryptocurrency — for more than its adjusted cost base (ACB).
Inclusion Rate
The inclusion rate determines what portion of a capital gain is included in your taxable income.
Principal Residence Exemption
The Principal Residence Exemption allows you to eliminate all or part of the capital gain when you sell your home, provided you designate it as your principal residence for each year you owned it.