Canadians - Selling Your Home

In the housing market that we have seen in recent years, the sharp increase in the value of a principal residence represents an interesting tax shelter, given the exemption on capital gains you realize upon the sale of such a residence. At first glance, the rule seems simple: you live in a residence, you sell it and you do not pay tax on the gain made at the time of the sale.

A house, a condominium, a mobile home, a houseboat, a share in a co-operative housing corporation, an apartment in a duplex or rental property: all these can be considered as a principal residence. This also includes the subjacent land of one half-hectare or less; for a larger area, the excess must be justifiable as necessary for the use and enjoyment of the residence. You must be a Canadian resident for each year in which your residence is designated as your principal residence. As long as you meet the requirements for Canadian residency, it is not necessary for this residence to be located in Canada: a residence that you occupy for a short period of time each year, such as a cottage or condominium in Florida, is eligible.

Owning two residences at once. Example - Members of the same family unit are owners of a city residence and a country cottage. When you sell one of the properties, you must choose whether to designate, partially or in full, the years of ownership of the property as your principal residence, bearing in mind that the years thus designated are then rendered unavailable for the same treatment when you come to sell the second property. Therefore, the following factors must be taken into account:

• Which property has increased more in value?

• Which property is likely to increase more in value in the future?

• Are there available or possible capital losses that could be deducted against the capital gain that occurred at the time of the sale of the property?

 

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