2023 TurboTax® Canada Tips

Reporting the Sale of Your Principal Residence

TurboTax Canada
November 29, 2019 | 3 Min Read
the sale of your principle residence

Prior to 2016, the sale of your principal residence wasn’t usually reported on your income tax return. Generally speaking, unless your home was used to generate income (ex. as a rental unit), the specifics of the sale were not sent to Canada Revenue Agency (CRA). For the tax year 2016, this is no longer the case. Even if you’ve never earned income from your home, you now must report the details of the sale on Schedule 3 of your return. For the 2017 tax year and beyond, you will also need to submit form T2091 (IND).

What has changed?

The exemption rules surrounding the sale of your principal residence haven’t changed. If your home was your principal residence the entire time you owned it, any profit you make from the sale is still exempt from capital gains. What has changed is that now the details of the sale must be reported. Same goes for “changes in use” rules meaning that if your principal residence became a rental at some point for example, you may be subject to capital gains tax for that period of time.

Along with the reporting requirements, CRA has also made a couple of other significant changes surrounding principal residences:

Reporting the Sale

The sale of a principal residence is reported on the newly revamped Schedule 3, and on  form T2091 (IND). If the home you sold was your principal residence for the entire time you owned it, reporting the sale is rather simple. Just check the box beside the option “I designate the property described below to have been my principal residence for all years owned.” and enter the details. You’ll need to enter:

If the home you sold was only your principal residence for part of the time you owned it, you sold multiple properties in one year, or the property had a change in use, check the corresponding box on the Schedule 3. You’ll also need to complete form T2091 (IND) if you are preparing a tax return for 2016.

Designating a Cottage as a Principal Residence

You may choose to designate another property as your principal residence, other than your family home. For example, if you sold your cottage last year for a sizable profit, you may consider designating it as your principal residence for the time you owned it. Keep in mind that if you do choose this route, when you sell your family home, you may end up with a capital gain. Here’s an example:

Penny bought her home in the city in 2001 and her cottage in 2010. She has used neither property in business or as a rental. She sold the cottage in 2016 for a profit of $150,000. Penny can name her cottage as her principal residence for the years 2010-2016. This means that the profit from the sale would be exempt under the capital gains rules.

However, If Penny sells her home in the city in 2017, capital gains may apply if she makes a profit. This is because between the years 2010 and 2016, the cottage was named as her primary residence. It’s important to consider all of the possible gains scenarios before designating your primary residence.

Which TurboTax Is Best for You?

Selling a house can be stressful. But your doing your income taxes doesn’t need to be, when you use TurboTax Online.

However, if you do feel a bit overwhelmed, consider TurboTax Live Assist & Review and get unlimited help and advice from a real person as you do your taxes. Plus, there’s a final review before you file. Or, choose TurboTax Live Full Service and have one of our tax experts do you return from start to finish.

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