How to Fill Out T2091(IND) for a Home Sale in Canada

You sold a home and now face two forms: Schedule 3 of your T1 return and Form T2091(IND). They work together, and it is easy to wonder which one does what and what you must fill in.

This guide walks through the order of work, what to collect first, and how the designation and gain calculation fit together. Form layouts and line numbers can change from year to year, so always follow the current version of each form.

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

What each form does

Since the 2016 tax year, the sale of a principal residence must be reported on Schedule 3, even if there is no gain or the gain is fully exempt. Individuals other than personal trusts designate the property and calculate any gain on Form T2091(IND).

A third form, T2091(IND)-WS, is a worksheet used to calculate a reduction due to a prior capital gains election made on Form T664 or T664 (Seniors). Most sellers will never need it. Personal trusts follow a different route and file Form T1079 naming each specified beneficiary.

Gather your numbers first

The form is only as good as the figures behind it. Before you start, collect the following.

• Proceeds of disposition: the selling price of the home.
• Adjusted cost base (ACB): generally the cost plus expenses to acquire it, such as commissions and legal fees, plus capital expenditures such as additions and improvements. Current expenses such as maintenance and repairs cannot be added.
• Outlays and expenses of the sale, such as legal fees, transfer taxes and advertising.
• A land and building split, because if the property was sold for land and building the selling price must be split between them on Schedule 3.
• If part of the home earned income, a reasonable split of selling price and ACB, which can be done by square metres or number of rooms.

Completing Form T2091(IND)

If the property was your principal residence for all the years you owned it, or all years except one, only page 1 needs completing. The extra year is the "plus one" year: CRA explains it as letting you designate the sold home for the year of sale when you also bought another home that year, and the result is that the whole gain is exempt.

If more years were not designated, the calculation compares B, which is one plus the number of years you designate, with C, the number of years you owned the property. The more years you can designate, the larger the share of the gain that is sheltered. Be aware of three adjustments.

• Vacant land years count in C but not in B, so they reduce the exempt fraction.
• If you were not a Canadian resident in the year you bought the new property, the plus-one year is not available, and where you were non-resident in the year you acquired the property, B counts only years of Canadian residence.
• Only one property per family unit can be designated for each year from 1982 onward.

Completing Schedule 3

Any gain that is not exempt is worked out as proceeds minus ACB and selling costs, and half of that capital gain is taxable and goes on line 12700. If the numbers produce a loss on your home, it cannot be claimed because a home is personal-use property.

What to do next

• Collect closing statements for both the purchase and the sale, plus receipts for improvements.
• Make a year-by-year list of when you owned the home and whether it was lived in, rented or vacant.
• Check whether any rental or business use means a change in use applies, which is generally a deemed sale at fair market value. For a partial change, such as a rented room or home office, there is no deemed sale if the use is relatively small, there are no structural changes and no CCA is claimed. A subsection 45(2) election to avoid a deemed sale is not available if CCA was claimed on the property after 1984 and on or before the change in use.
• Complete Form T2091(IND), then transfer the results to Schedule 3 and file with your T1 return.
• If you forgot to designate in the year of sale, ask the CRA to amend that return, keeping in mind that a penalty may apply.
• Ask a lawyer or accountant for help if you owned the home through a trust, inherited it, or were a non-resident for any years.

Frequently asked questions