- Under CRA's folio, ownership for the exemption includes being a beneficial owner, so the beneficial owner behind a bare trust can look to the exemption.
- Certain related owners of a home that would be a principal residence are excluded from the bare trust deemed-trust rule.
- How the exemption applies to your home depends on your situation, so it is worth confirming the details with an advisor.
Holding a home through a bare trust is common. A parent may be on title so a child can get a mortgage, or a person may hold title for a family member. You may worry that the arrangement costs you the principal residence exemption when the home is sold.
This article explains how the CRA views ownership for the exemption, when the home is excluded from the new bare trust reporting rules, and what to check.
This article covers Canadian federal tax law, which applies in every province.
Who counts as the owner
A bare trustee is only an agent who holds legal title, while the beneficiary is the beneficial owner. The CRA's folio on principal residences says that ownership for the exemption includes being a beneficial owner of the property, whether alone or jointly with another person.
So the beneficial owner behind a bare trust can look to the exemption. The CRA also says that income, capital gains and capital losses from reportable bare trust property should be reported on the beneficial owner's return. The trustee does not report them on the trust's T3.
What the bare trust does not change
The exemption has further conditions beyond ownership, including a requirement that the home be ordinarily inhabited. How those conditions apply when a home is held through a bare trust depends on your situation, so it is worth confirming with a lawyer. Whether the home qualifies for each year you want to claim is a separate question to confirm with an accountant or lawyer.
If a trust itself, rather than the beneficial owner, wants to designate a property as its principal residence, there is a limit: no corporation, other than a registered charity, or partnership can have been beneficially interested in the trust.
Family arrangements excluded from the new rules
Beginning with the 2026 year, reportable bare trusts are subject to the trust reporting rules. Several common home arrangements fall outside the deemed-trust rule:
| Arrangement | Treatment |
|---|---|
| Related individuals are the legal owners and the property would be the principal residence of one or more of them | Excluded from the deemed-trust rule. The CRA says this covers a parent on title to allow a child to obtain a mortgage |
| One spouse or common-law partner holds real property for the other, and it would be the owner's principal residence | Excluded. The CRA's example is spouses jointly occupying a family home with only one on title |
| Every beneficiary is also a legal owner and no legal owner is a non-beneficiary | Excluded |
For this purpose, related persons include individuals connected by blood relationship, marriage, common-law partnership or adoption. Arrangements outside these exclusions, such as a home held for someone who is not related to the titleholder, may be reportable depending on the facts.
Filing and timing
The CRA does not expect bare trusts to file a T3 or Schedule 15 for taxation years ending in 2025. The first returns are for the 2026 year, due March 31, 2027 for a December 31 year-end.
If a return is required, the CRA says only the marked fields on the T3 need completing, and if there is no governing document name, you list the beneficial owner's legal name followed by the word Trust. A late filing with no tax owing is likely to carry a penalty of $25 a day, with a minimum of $100 and a maximum of $2,500.
Separately, the underused housing tax no longer requires a return or payment for 2025 and later calendar years, though filing and payment still apply to 2022, 2023 and 2024. For those earlier years, a trust is not a person for this tax, so the trustee who owns the property is the owner and files Form UHT-2900 if an affected owner.
What to do next
- Confirm who holds legal title and who is the beneficial owner.
- Find any written agreement explaining why title is held this way.
- Note which years the home was ordinarily inhabited and by whom.
- Check whether the related-owner or spousal exclusion applies.
- Speak with a lawyer or accountant before a sale or before the 2026 year-end.
Frequently asked questions
Can I claim the principal residence exemption if the home is in a bare trust?
The CRA's folio says ownership for the exemption includes being a beneficial owner, alone or jointly, so the beneficial owner can look to the exemption. Other conditions of the exemption still apply, so confirm them for your situation.
Do I need to file a T3 if a parent is on title for my mortgage?
Related individuals who are legal owners of property that would be the principal residence of one or more of them are excluded from the deemed-trust rule, and the CRA says this covers a parent on title to allow a child to obtain a mortgage. Your facts should still be confirmed.
When do bare trusts first have to file?
Reportable bare trusts are subject to the rules for taxation years ending on or after December 31, 2026, so the first returns are for the 2026 year. For years ending in 2025, the CRA does not expect a T3.
Who reports a gain on the home?
The CRA says capital gains and losses from reportable bare trust property should be reported on the beneficial owner's tax return. How the exemption applies to the gain is worth confirming with an advisor.
Sources
- CRA – T3 Trust Guide 2025 — canada.ca
- CRA – Important updates to the trust reporting requirements for the 2025 taxation year — canada.ca
- CRA – Enhanced reporting rules for trusts and bare trusts: FAQ — canada.ca
- CRA – Income Tax Folio S1-F3-C2, Principal Residence — canada.ca
- CRA – Questions and Answers on the Underused Housing Tax — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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