Form T2091 for Designating a Principal Residence in Ontario

Form T2091(IND) is the CRA form used to designate a property as your principal residence. If you sold a home, it is likely part of your tax filing for that year.

This article explains when it is required, the information behind it, the late penalty, and what to do if you missed it.

When you file Form T2091

You report a sale of a principal residence on Schedule 3, Capital Gains or Losses, and designate the property by ticking box 1 at line 17900 of Part 1. Form T2091(IND) is completed and included with the return.

The form is required even if the home was the principal residence for every year owned. It is also required for a deemed disposition such as a change in use. If you sold more than one former principal residence in the same year, you file a separate Form T2091(IND) for each property.

What information it relies on

The form determines how much of your gain is exempt. That calculation uses the formula A − (A × B/C) − D.

• A: the gain otherwise computed.
• B: the years after acquisition that the property was your principal residence and you were resident in Canada, plus one if you were resident in the acquisition year.
• C: the years after acquisition that you owned the property.
• D: applies only to properties acquired before February 23, 1994, where a subsection 110.6(19) election was made; otherwise zero.

The gain itself is proceeds of disposition minus the adjusted cost base and outlays and expenses of the sale. Adjusted cost base usually includes the cost plus acquisition expenses such as commissions and legal fees, and capital improvements, but not maintenance or repairs. Selling costs include fixing-up costs, brokers' fees, legal fees, transfer taxes and advertising.

Only page 1 is completed if the property was the principal residence for all years owned, or all but one. Otherwise, more of the form applies, and an accountant or lawyer can help you complete it.

One home per year

For 1982 and later years, only one home can be designated as the family's principal residence for each year. This matters if you own a house and a cottage, or if you owned two homes in overlapping years.

If you rented out your home, a change in use is treated as a sale at fair market value unless an election applies. For a full conversion to a rental, you can elect not to be treated as having changed its use, and the property can then be designated as the principal residence for up to four years. The election is made by attaching a signed letter to the income tax return describing the property and stating that you want subsection 45(2) to apply. You must not designate any other property for those years and must remain a Canadian resident.

The penalty for forgetting

The penalty for a late-filed election or designation is the lesser of $8,000 and $100 for each complete month from the original due date to the date of the request. The Minister may extend the time for an election if you apply within ten calendar years after the end of the relevant tax year.

The CRA says it may accept a late principal residence designation in certain circumstances, but a penalty may apply. If a sale was never reported, the CRA may reassess beyond the normal reassessment period, limited to amounts related to that disposition.

What to do next

• Confirm whether the sale appeared on a previous return, including Schedule 3 and Form T2091(IND).
• Gather purchase and sale closing statements, improvement receipts and records of rental use.
• Note the years you lived in the home and which other properties you owned.
• If you rented the property, find out whether a subsection 45(2) letter was attached to your return.
• If you missed the filing, speak with a lawyer or accountant about requesting a late designation.

Frequently asked questions