Sold Your Home? CRA Wants to Know!
You’ve sold your home – congrats! And because it was your principal residence, you didn’t have to pay tax on the capital gain – YAY! Canadians don’t get many tax breaks so this is good news! It’s such good news that the Canada Revenue Agency (CRA) wants to hear about it – and if you don’t tell them, they are likely to get a bit cranky with you…
The Principal Residence Exemption allows Canadian residents to be exempt from paying tax on the capital gain earned on the sale of their principal residence. You can designate one property per year as a principal residence.
Though you still enjoy a tax exemption on the capital gain, a couple of years ago CRA introduced new reporting requirements requiring that you report the sale of your home on your tax return. If you neglect to report the sale, you could be reassessed and be subject to a penalty – up to a maximum of $8,000. In addition, the rules permit CRA to examine property sales beyond the standard reassessment period.
The rule has been in place since 2016, however, it didn’t get much press so some taxpayers are learning the hard way. Generally speaking, your eligibility for the principal residence exemption should remain the same, and the CRA will now have a record of that claim. The CRA can use these records to crack down on non-Residents claiming the exemption or taxpayers claiming it for multiple properties within the same year.
In practical terms, this means that you need to fill out Schedule 3 of the T1 tax return and either form T2091 or T1255. While this is a service I also provide to my real estate clients, I would recommend others to reach out to their accountant or professional advisor before you file. Any questions I’m happy to help – send me a message!