Can I Make a Subsection 45(2) Election to Delay a Change in Use of My Home in Canada?

This answer covers Canadian federal tax law, which applies in every province.

Yes, if you are changing your home from personal use to income-producing use, you can elect under subsection 45(2) that there be no deemed disposition. You make the election by attaching a signed letter to the return for the year of the change, describing the property and citing subsection 45(2).

While it earns income, no CCA can be claimed on the property, and you may designate it as your principal residence for up to four years if you do not designate another property and remain a Canadian resident. The four-year limit can be extended indefinitely under section 54.1 in certain employer-relocation cases, including where the home is at least 40 km farther from the new workplace than your subsequent residence.

The election is not available if CCA was claimed on the property after 1984 and on or before the change in use. A partial change in use, such as a rented room, can also qualify for an election since 19 March 2019. If you later move back in, a different election under subsection 45(3) may apply.