Thursday, September 7, 2023
The capital gains tax, introduced by the federal government in 1972, is charged on the difference between what you paid for an asset – for example, a stock, a bond or a home, and what you sold it for. 

Capital gains on homes

When you sell your home, you may realize a capital gain. If the property was solely your principal residence for every year you owned it, you don’t have to pay tax on the gain, but you must report the sale to the Canada Revenue Agency (CRA).

If at any time during the period you owned the property, it was not your principal residence, or solely your principal residence, you may not qualify for the principal residence exemption on all or part of the capital gain that you have to report.

Report the sale of your home to the CRA

If you've sold a property, you must report the sale on:

The CRA will only allow the principal residence exemption if you report the disposition and designation of your principal residence on your income tax and benefit return.

Don't forget

If you forget to make this designation in the year you sell your property, you must ask the CRA to amend your income tax and benefit return for that year. The CRA will accept a late designation in certain circumstances, but a penalty may apply.

Other conditions

  • If you have owned the property for less than a year, the capital gains will be considered short-term and taxed at your regular income tax rate. If you've owned the property for more than a year, the gains will be considered long-term and taxed at a lower capital gains tax rate.
  • If your home wasn't your principal residence for every year that you owned it, you must report the part of the capital gain on the property that relates to the years you didn’t designate the property as your principal residence by completing Form T2091(IND). You must also complete the applicable sections of Schedule 3 on page 2 of the schedule.

 

It’s important to get advice from a lawyer or an accountant.