If you have just sold your house -- congratulations! After selling a home a few weeks ago, I had a conversation with my seller regarding her retirement and how she planned to take all her money and move to Hawaii. She had just recently sold her principal residence, and therefore I urged her to speak to her accountant regarding reporting it in her tax return.
As some of you may or may not know, there were many important changes implemented by the government regarding the filing of your T1. If you sold your principal residence in 2016, you now need to report this on the Schedule 3, Capital gains of the T1 Income tax and benefit return.
What you will need to report:
New rules require you to report the sale of a property you are designating as a principal residence on your tax return. Therefore, if you sold a home as of January 2016, you'll have to provide basic information including the year you bought the home, how much you sold it for, and of course the house address!
I thought I don't have to pay taxes on my principal residence, due to the exemption?
You are absolutely right! As long as you are designating your home as your principal residence for all the years you owned and occupied it, you DO NOT have to pay tax on the PROFIT of the sale, all in thanks to the principal residence exemption. However, be aware that if you own more then one property, only one can be designated as your principal residence. Regardless of whether you live in your condo for most of the year and your home up north for the winter, only one can regarded as your principal residence.
Non-Resident of Canada?
A few of my foreign clients are probably reading this and wondering where they fit into all of this! Well, if you are a non-resident who owned property in Canada, you are NOT entitled to the principal residence exemption. Previously, non-residents were able to designate it in the year they bought the property, however with these new changes, that is not the case.
Don't get caught having to pay penalties and interest charges!
In the upcoming tax season, if you sold your principal residence in 2016...REPORT IT! If you don't report it, you will not be eligible for the principal residence exemption. Furthermore, there are new rules that allows the CRA to reassess you beyond the standard three-year reassessment period if you don't report a sale of real estate on your tax return. Failing to report the sale puts you at risk for not only being reassessed but also paying penalties and interest charges in the future.
If you have any questions about real estate and your tax return, I urge you to speak to your accountant. You can find more information at the following: