Selling a Jointly Owned Home in Canada: Who Can Claim the Exemption?

Many homes are owned by more than one person: spouses, unmarried partners, or a parent and an adult child who was added to title. When the home is sold, each owner wonders the same thing. Do I get the principal residence exemption on my share?

The answer is not automatic. Each owner is tested on their own, and the tests differ depending on who lived in the home and what else the owner's family designates. This article explains the main rules in plain terms.

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

Co-ownership counts as ownership

For the exemption, a property must be a housing unit that you own, alone or jointly with another person, and that is ordinarily inhabited in the year by you, your spouse or common-law partner, your former spouse or partner, or your child. Ownership includes sole ownership, joint tenancy, tenancy-in-common and other co-ownership.

Being on title is therefore a starting point only. The second part, ordinary habitation, applies to each owner's own claim.

Each owner reports and designates separately

Each co-owner reports their own share of the sale on their own return and designates the property separately. Each can do so only if no other property is designated for their family unit that year.

The sale must be reported on Schedule 3 of the T1 return even if there is no gain or the whole gain is exempt, and CRA allows the exemption only if the sale and the designation are reported. Individuals designate the property and calculate any gain on Form T2091(IND). On Schedule 3, the designation is made in Part 1 by ticking box 1 at line 17900 if the home was the principal residence for all years owned, or all but one, or box 3 if it was not the residence for every year owned.

When a co-owner cannot claim

A co-owner who does not live in the home, for example an adult child on title for a parent, cannot designate it unless the home was ordinarily inhabited in the year by that co-owner or their spouse or partner, former spouse or partner, or child.

Whether a home is ordinarily inhabited is a question of fact. Even a short period of occupation in the year can be enough, but where the main reason for owning is to earn income, a brief stay generally will not qualify. If the parent lived there and the child did not, the child's share may not be sheltered. How much of a gain exists in that situation depends on the facts, so it is worth confirming with an accountant or lawyer.

The family unit: one home per year

Only one property per family unit can be designated as a principal residence for each year from 1982 onward. For 1993 and later years, the family unit is you, your spouse or common-law partner and your unmarried children under 18.

Spouses may split years between two homes by designating each home for different years, as long as no year is designated for two properties.

What to do before you sell

• List every owner on title and who actually lived in the home each year.
• Check whether any owner's family unit already designates another home for the same years.
• Gather purchase documents, legal fees, commissions and records of improvements, since the gain is worked out from proceeds, adjusted cost base and selling costs.
• Report the sale on Schedule 3 and complete Form T2091(IND) for each owner who designates.
• Ask a lawyer or accountant about any owner who did not live in the home.

If you forget to designate in the year of sale, ask CRA to amend that year's return. CRA may accept a late designation, but a penalty may apply, and the Minister may extend the time if the request is made within ten calendar years after the tax year ends. The late-election penalty is the lesser of $8,000 and $100 for each complete month between the due date and the date of the application.

Frequently asked questions