Sale of Principal Residence in Canada

In 2016, in an effort to track compliance of the Principle Residence Exemption, the CRA changed the rules regarding the sale of your principle residence. This change did not affect the full tax free exemption itself, but rather it requires taxpayers to report sale information on their T1 personal tax return.  In the years before 2016 there was no requirement to report the sale of your home, provided the home was your main residence for all the years you owned it.  For tax year 2017 and going forward you are now required to report the sale, designate the property, and complete Form T2091 in order to claim the principle residence exemption. Failure to report the sale of your home could trigger penalties from the CRA.

• A principle residence can be any of the following:

  • House

  • Condominium

  • Apartment in an apartment building or duplex

  • Cottage

  • Mobile home, trailer, or a houseboat

For taxpayers who only own one property the new reporting process is fairly simple and just entails providing a description of the property on your tax return; including the address, date acquired and the amount of disposition proceeds. However, if you own two or more properties, the reporting requirements become more in depth and require more consideration on your part. If you are selling one, or more, of the properties in the year with a profit then you will have to designate which property you want to qualify as your principle residence on Form T2091. In doing so you then disqualify the other residence and you may be subject to tax on the capital gains upon sale, therefore it is important to consider the different scenarios of selling each of the homes. If your property was used a source of income, then additional information is required on the form T2091 to advise of the years used for residence vs earning income.

The above information is of a general nature only and should not be relied upon for specific situations.  Call Marlies Y Hendricks, CPA at 416-766-3941 or submit email enquiry form below to set up a consultation.