Most people who own a home know that when they sell their home, the profit made is one of the few things that are not taxable in Canada. But things got a little more complicated last year, so read on to make sure you’re prepared.
In years prior to 2016 it was understood that your principal residence had an exemption that eliminated any capital gains earned. What the definition of a principal residence is and the nuances of that are for another day, and most likely better handled by an accountant. What you do need to know though is on October 3, 3016 the federal government announced that starting in the 2016 tax year, the sale of a principal residence must be reported on your tax return in order to claim the principal residence exemption.
The particular form to be used is called a Schedule 3 in order to claim the principal residence exemption. There is a penalty which can become as high as $8,000 for late filing, and if you fail to report the sale of your principal residence at all, you may be taxed on the capital gain.
If your home was your principal residence for the entire time that you owned it, the sale will only have to be reported on Schedule 3, where you will provide the proceeds of the sale (selling price), the year you bought your home, and address. If there is more than one owner, each will report the sale on Schedule 3, using only their share of the proceeds. So for instance, when a home is owned jointly by a husband and wife, each would own 50%, and accordingly report 50% of the proceeds on their taxes.