What You Need to Know When Selling Your Home
Updated: Apr 21, 2020
If you are selling your personal home, you are eligible for what is known as the “principal residence exemption.” In simple terms, this means that you are not required to pay tax on the money received from selling your home. Essentially, you keep any profits from selling it.
In order to claim this exemption, you must designate the property as your “principal residence” on your tax return. This can be accomplished by completing the T2091 form as well as the bottom portion of Schedule 3 (Capital Gains). This must have been done by the time you submit your taxes. By filing late, you run the risk of having the CRA refuse the designation. If they do still accept it, you will be facing stiff fines.
You designate your home by declaring it your principal residence for each year that you lived there. You can designate one home per year. If your initial thought is that you can only claim one home as a principal residence, that’s understandable, but not accurate. You may claim more than one home as a principal residence.
Claiming More than One Principal Residence
Though it may not sound logical, it is possible to have more than one home categorized as a principal residence, and it is much easier than you would expect.
The CRA requires that you demonstrate that you live in the house to be sold. What they don’t require is that a specific amount of time be spent living there. This means that as long as you lived in the home for a portion of the year, you meet the rule of eligibility. Remember though, you can only claim one house each year that you are designating homes as a principal residence.
To make that clearer, you may have primary and secondary homes. During certain years, you may choose to claim the secondary home as your principal residence. During those years, you may no longer use the exemption when selling your regular home.
If you need help with your taxes when you are selling your home, contact Majid Iravani, Chartered Professional Accountant.