Ontario Home Flipping Rule: Tax on Homes Sold in Under 365 Days

If you bought a home in Ontario and now need to sell within a year, the federal residential property flipping rule may affect your tax. It can turn what you expected to be a tax-free sale of your home into fully taxable income.

This article explains what counts as a flipped property, what the rule does to the profit and to a loss, and the exceptions that may apply. The exceptions have detailed definitions, so your own situation is worth confirming with a lawyer or accountant.

What the flipping rule does

Under the residential property flipping rule, profit on a flipped property is deemed to be business income, and the principal residence exemption is not available. A flipped property is a housing unit in Canada, not already inventory, that you owned for less than 365 consecutive days before it is sold.

The rule applies to sales on or after January 1, 2023. That means the profit is not treated as a capital gain. Ordinarily the taxable portion of a capital gain is limited by the inclusion rate, which is 50% for 2025. Because the profit on a flipped property is deemed business income, the principal residence exemption does not reduce it. How the profit is taxed in your own case depends on your situation, so it is worth confirming with a lawyer or accountant.

For the principal residence exemption, a home can be a house, cottage, condominium, apartment, trailer, mobile home or houseboat. Whatever kind of home you own, the number of days you held it is the first thing to check before you sell.

What happens if you lose money

The rule works in one direction only. A loss on the sale of a flipped property is deemed to be nil. So you cannot use the loss to reduce other income. This is one reason to check the rule before you list a home you have owned for less than a year.

Exceptions to the rule

The flipping rule does not apply if the sale is due to, or made in anticipation of, certain life events. The listed events are:

• the death of the taxpayer or a related person
• a related person joining your household, or you joining theirs
• a serious disability or illness
• involuntary termination of employment
• an eligible relocation
• insolvency
• destruction or expropriation of the property
• a threat to personal safety

There is a separate exception for separating couples. The rule does not apply if the sale is due to the breakdown of your marriage or common-law partnership and you have lived separate and apart from your spouse or common-law partner for at least 90 days before the sale.

Terms such as 'eligible relocation' have detailed statutory definitions in the Income Tax Act, so whether your situation fits is decided case by case.

Comparing the two outcomes

If an exception applies, the sale is handled under the normal rules. The home may qualify for the principal residence exemption if it meets the conditions, including that you designate it as your principal residence.

Under the normal rules, if the property was solely your principal residence for every year you owned it, you usually pay no tax on the gain. If it was not, only part of the gain is exempt, calculated as the gain × (designated years + 1) ÷ years owned.

When you sell your principal residence, you report the sale and the designation on Schedule 3 and also complete Form T2091(IND). An executor or other legal representative of a deceased person uses Form T1255 instead of T2091(IND).

What to do next

• Count the days from the date you acquired the property to the date of sale; the test is 365 consecutive days.
• Confirm whether the sale date is on or after January 1, 2023.
• Write down why you are selling and keep documents that support it, such as medical, employment, separation or relocation records.
• If a relationship has ended, note the date you began living separate and apart, as 90 days is the test.
• Speak with a lawyer or accountant before you list the property, since the result changes how the sale is reported.

Frequently asked questions