Selling your home? Be sure to abide by the new tax rules

For many Canadians, it’s the biggest tax break of all. When you sell your principal residence, capital gains are exempt from tax. But homeowners selling after October 2016 have to jump through a few hoops to get the exemption. Here’s what you need to know.

How the exemption works

Typically, people claim the principal residence exemption on a house or condominium that they own or co-own, but vacation property, a mobile home or even a houseboat can qualify.

You, your spouse or one of your children must have ordinarily inhabited the property during any year it’s designated as a principal residence. In addition, only one home per family can qualify in any given year.

Previously, a homeowner didn’t need to report the sale to receive the exemption. As of the 2016 tax year, you must report the sale on Schedule 3 of your tax return.

If you fail to report it in the year of the sale, you can amend your return but a penalty may apply. If you sold your home in 2016 and didn’t report the sale on your return, however, you’re probably okay. During this “communication period,” the Canada Revenue Agency has indicated that “the penalty for late-filing a principal residence designation will only be assessed in the most excessive cases.”1

Trusts are also affected

The rules around trusts have also changed. Previously, a principal residence held in virtually any kind of trust could qualify for the exemption. Now, the exemption is available only for “eligible trusts.” These include spousal or joint spousal trusts, alter ego trusts, certain disability trusts and qualifying trusts for minor children of deceased parents but not traditional family trusts for children or grandchildren.

If you want to find out more about the principal residence exemption rules, please talk to us, your lawyer or your tax advisor.


1 Canada Revenue Agency “Reporting the sale of your principal residence for individuals” at cra.gc.ca (accessed May 2017)


This material was prepared for and published on behalf of the representative named herein and is intended only for clients resident in the jurisdiction(s) where their representative is registered. This material is provided solely for informational and educational purposes and is not to be construed as an offer or solicitation for the sale or purchase of any securities or as providing individual investment, tax or legal advice. Consult your professional advisor(s) prior to acting on the basis of this material. Insurance products are available through advisors registered with applicable insurance regulators. Individual equities are available only through representatives of Assante Capital Management Ltd. In considering any particular investment, please remember that past performance is no guarantee of future performance. Although this material has been compiled from sources believed to be reliable, we cannot guarantee its accuracy or completeness. All opinions expressed and data provided herein are subject to change without notice. Neither Assante Financial Management Ltd. or Assante Capital Management Ltd. nor their affiliates or their respective officers, directors, employees or advisors are responsible in any way for any damages or losses of any kind whatsoever in respect of the use of this material. Certain names, logos or graphics herein may constitute trade names, trademarks or service marks (“Trademarks”) of CI Investments Inc. and/or its affiliates or of third parties. The display of Trademarks herein does not imply any licence has been granted to any third party. Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. Copyright © 2019 Assante Wealth Management (Canada) Ltd. All rights reserved.