Selling Property: Claiming the Principle Residence Exemption 

When selling a home, consider capital gain. From the CRA:  If the property was solely your principal residence for every year you owned it, you do not have to pay tax on the gain. If at any time during the period you owned the property, it was not your principal residence, or solely your principal residence, you may have to report all or part of the capital gain.

Recent changes to the Canada Revenue Agency’s requirements now require you to report the sale of your principal residence on your tax return. If you sold property in 2017 that was, at any time, your principal residence, you must report the sale on Schedule 3 of your return and you must also complete the appropriate sections of Form T2091(IND), Designation of a Property as a Principal Residence by an Individual.

Under the Income Tax Act, your property must meet 4 criteria to qualify for PRE:

  • The property must be a housing unit;
  • You must own the property either alone or jointly;
  • you or your family must ordinarily inhabit the property;
  • The property must be designated as a principal residence.

A seasonal residence can be considered ordinarily inhabited in the year even if it’s only used for vacation, as long as it isn’t used to gain income.

The complexities around claiming the Principle Residence Exemption come up from time to time in court cases. Consider this case study for the Financial Post by Jamie Golombek, CPA, CA, CFP, CLU, TEP is the Managing Director, Tax & Estate Planning with CIBC Financial Planning & Advice Group in Toronto.