Can You Designate a Home After Selling It Without Reporting in Canada?

You sold a home years ago and did not report it, perhaps because you assumed it was tax-free. That assumption is common, but the reporting rules changed.

Whether a late designation can be accepted depends on your situation, because CRA may accept one only in certain circumstances. This article explains how a late designation generally works and what relief may exist. A lawyer or accountant can help with your situation.

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

Why reporting matters

Since the 2016 tax year, the sale or deemed sale of a principal residence must be reported on Schedule 3 of the T1 return, even if there is no gain or the whole gain is exempt. CRA allows the exemption only if the disposition and designation are reported.

Not reporting does not make the sale disappear. Without a designation, the gain may be taxed, and half of a capital gain is taxable.

How a late designation works

If you forget to designate in the year of sale, you ask CRA to amend the return for that year. CRA may accept a late designation in certain circumstances under subsection 220(3.2) of the Income Tax Act, but a penalty may apply.

The Minister may extend the time if the request is made within ten calendar years after the tax year ends.

The penalty and possible relief

The late-election penalty is the lesser of $8,000 and $100 multiplied by the number of complete months between the due date and the date of the application. The Minister may also waive or cancel penalties or interest if the request is made within ten calendar years after the tax year ends.

What the designation involves

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 at line 17900 if it was not the residence for every year owned; Part 2 reports the sale.

Individuals designate a property and calculate any gain on Form T2091(IND). Only page 1 needs completing if the property was the principal residence for all years owned, or all years except one.

The capital gain is the proceeds of disposition minus the adjusted cost base and the outlays and expenses of the sale. A home is personal-use property, so if you have a loss on the sale you cannot claim it.

Things that can complicate a late claim

• For sales after 2022, a property held less than 365 consecutive days before sale is generally treated as a flipped property with business income, so the exemption does not apply, unless an exception such as death, illness or relocation applies.
• Only one property per family unit can be designated for each year.
• A spouse or common-law partner separated for the whole year under a court order or written separation agreement is not in the same family unit for that year.
• Each co-owner reports their own share on their own return and designates the property separately.
• If you were not a Canadian resident the whole time you owned the property, CRA directs you to call 1-800-959-8281.

What to do next

• Find the year of sale and the purchase and sale documents.
• Work out the gain and the years the home was your principal residence.
• Complete Schedule 3 and Form T2091(IND).
• Ask CRA to amend the return for the year of sale.
• Ask whether penalties or interest can be waived within ten calendar years.
• Speak with a lawyer or accountant, especially if more than ten years have passed.

Frequently asked questions