Capital Gains Tax on Canadian Property: Reporting and Deadlines in Ontario

Selling a property is not finished at closing. The sale has to be reported on your income tax return, and which forms you use depends on what kind of property it was and how you used it.

This article explains the main forms for an Ontario seller, how a principal residence designation is made, and which penalties are tied to late or missing filings. If your situation is unusual, a lawyer or accountant can confirm the details.

Schedule 3: where the sale is reported

Capital gains and losses are reported on Schedule 3, and the taxable capital gain is carried to line 12700. The gain is the proceeds minus the adjusted cost base and the outlays and expenses of selling.

When you sell your principal residence, you must report the sale and the designation on Schedule 3. If the property was solely your principal residence for every year you owned it, you usually pay no tax on the gain. The sale still needs to be reported.

Form T2091 and other forms by situation

For a principal residence, you also complete Form T2091(IND), Designation of a Property as a Principal Residence by an Individual (Other Than a Personal Trust). Other forms apply in other situations.

If you received rental income, you file a statement of income and expenses on Form T776, with gross rents on line 8299 and the net amount from line 9946 going to line 12600 of your return. Joint owners each report their share according to their ownership share.

Late designations and the penalty

The CRA will accept a late principal residence designation in certain circumstances, but a penalty may apply. How a penalty applies to a particular late designation depends on the facts, so it is worth confirming with a lawyer or accountant.

The designation matters because, for 1982 and later years, a family can designate only one home as its principal residence for each year. A spouse or common-law partner is not part of your family unit for that limit if, throughout the year, they lived apart from you and were separated under a judicial separation or a written separation agreement. If the home was not your principal residence for every year you owned it, only part of the gain is exempt.

Foreign property and Form T1135

If you also own property outside Canada, a separate reporting rule may apply. Canadian residents, corporations and certain trusts must file Form T1135 if they own specified foreign property costing more than $100,000 at any time in the year. The threshold is based on cost amount, not fair market value. A vacation home used mainly as a personal residence is personal-use property and is not specified foreign property.

The form is due on the same date as the income tax return: on or before April 30 for most individuals and June 15 for self-employed persons. The penalties are significant:

• Failure to file: $25 per day for up to 100 days, with a minimum of $100 and a maximum of $2,500.
• Knowing or grossly negligent failure: $500 per month for up to 24 months, to a maximum of $12,000.
• A false statement or omission: the greater of $24,000 and 5%.

The CRA's reassessment period is also extended by three years if you failed to report income from specified foreign property and the T1135 was not filed, was late or was inaccurate. Income from foreign property must be reported whatever its cost.

What to do next

• Keep your closing documents, lawyer's statement of adjustments and records of costs.
• Confirm whether the property was a principal residence for all years, some years or none.
• Identify which forms apply: Schedule 3, T2091(IND), T776, or estate forms.
• If a designation was missed in an earlier year, speak with a lawyer or accountant promptly, because the CRA will accept a late designation only in certain circumstances and a penalty may apply.
• Ask about any other penalties or filing steps that may apply to your sale, since they depend on the facts.

Frequently asked questions