Principal Residence Exemption – 2016 Reporting Requirements
For the 70% of Canadians who own a home, it is a place to live, raise a family, and connects them to their community. Due to Canada’s tax system’s Principal Residence Exemption, when we sell our homes, any increased value or “capital gains” are not taxed.
This tax break matters to Canadian homeowners. Collectively, we have about $3 trillion in home equity and our homes are often our largest financial asset. However, starting with 2016 income tax returns, there are some changes in how homeowners qualify for the Principal Residence Exemption.
Until now, the Canada Revenue Agency has not required Canadians to report on a home sale during a tax season. However, if you sold your home in 2016 or later, you will need to complete a Schedule 3, Capital Gains of the T1 Income Tax and Benefit Return in order to report your sale.
The good news is that, in terms of taxes, nothing has changed. The same tax benefit is available to anyone who sells their home, provided the property was the principal residence for every year you owned it – even if you use part of your home for business purposes. There is no “new tax” involved, only a requirement you report the sale details on your tax returns.
The Canadian Real Estate Association (CREA)