Can a condominium qualify as a principal residence in Ontario?

Yes. A condominium in Ontario can qualify as a principal residence for the purposes of the federal principal residence exemption. The exemption applies to a "housing unit," which the Income Tax Act defines broadly to include a house, apartment, duplex unit, or condominium. It also covers a share in a co-operative housing corporation that entitles you to inhabit a unit.

The same qualifying rules apply to a condo as to any other home. The unit must have been "ordinarily inhabited" by you, your spouse or common-law partner, a former spouse, or your child during the year for which you are claiming the designation. You can only designate one property per family unit per year.

One practical issue in Ontario's condo market is properties that were purchased pre-construction and then "assigned" before the builder closes. Capital gains on assignment sales are generally not sheltered by the PRE because you never actually inhabited the unit — the exemption requires actual occupation. The CRA has increased its scrutiny of assignment sale reporting in recent years.