Do I have to pay tax on the profit from selling my primary residence in Ontario?

Under the federal Income Tax Act, Canadians can claim the principal residence exemption (PRE) to shelter capital gains when they sell a home they designated as their principal residence for each year they owned it. If you lived in the home as your principal residence for every year of ownership, the entire gain is typically exempt from capital gains tax.

This is a federal tax rule administered by the Canada Revenue Agency, not an Ontario-specific law. When you sell, you must report the disposition on your income tax return for that year, even if no tax is owing. Failing to report can result in penalties.

The exemption applies to one property per family unit per year. If you own more than one property — say, a home and a cottage — only one can be designated as a principal residence for any given year. A portion of the gain on the second property may then be taxable. If you have rented out part of your home or used it for a home business, speak with a tax professional about whether partial taxation applies. Rules can be complex; the CRA's guidance and a qualified accountant are your best resources.