Do I Have to Report the Sale of My Home on My Ontario Tax Return to Claim the Principal Residence Exemption?
Yes. When you sell your principal residence, you must report the sale and the designation on Schedule 3 (Capital Gains or Losses), and you also complete Form T2091(IND), Designation of a Property as a Principal Residence by an Individual (Other Than a Personal Trust). The designation is also one of the conditions for a property to qualify as your principal residence for a year.
If the property was solely your principal residence for every year you owned it, you usually pay no tax on the gain. Otherwise only part of the gain is exempt, using the gain × (designated years + 1) ÷ years owned. If part of the home earns income, you split the selling price and adjusted cost base between the two uses, though the CRA generally keeps full treatment where the income use is ancillary, with no structural change and no CCA claimed.
If you forget, the CRA will accept a late designation in certain circumstances, but a penalty may apply. Whether a penalty applies, and how much, depends on your situation, so it is worth confirming with a lawyer or accountant before you file late. A deceased person's executor uses Form T1255 instead.
Key takeaways
- You report the sale and the designation on Schedule 3 and complete Form T2091(IND).
- If the property was solely your principal residence for every year you owned it, you usually pay no tax on the gain.
- The CRA will accept a late designation in certain circumstances, but a penalty may apply.
- An executor of a deceased person uses Form T1255 instead of T2091(IND), and a personal trust claiming the exemption files Form T1079.