Do You Have to Report the Sale of Your Home to the CRA in Canada?

You sold the home you lived in, and you expect to pay no tax on it. It is natural to wonder whether you can simply leave the sale off your return, since there is nothing to pay.

In general, you cannot. This article explains what the CRA expects, where the sale is reported, when a sale that feels exempt may not be, and what to do if you missed the reporting in an earlier year.

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

Short answer: yes, report it

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

In plain words, the exemption is not automatic. You claim it by reporting the sale and designating the home. A fully exempt sale means no tax on the gain, but the paperwork still has to be filed.

What you report, and where

Individuals other than personal trusts designate the property and calculate any gain on Form T2091(IND). If the home was your principal residence for all the years you owned it, or all years except one, only page 1 of that form needs to be completed.

• Schedule 3, Part 1 is where you designate the home: tick box 1 at line 17900 if it was your principal residence for all years owned or all but one, or box 3 if it was not your residence for every year owned.
• Schedule 3, Part 2 is where you report the sale itself.
• If part of the home earned income, the gain on that portion goes on line 13800.
• If you sold more than one property in the year, the gain for each property is reported on line 15800.

Line numbers can change from one tax year to the next, so check them against the current form.

When a sale that feels exempt may not be fully exempt

Many home sales are fully exempt, but a few situations catch people by surprise. It is worth checking these before you assume the gain is zero.

• Years not designated: the exempt share depends on the number of years you designate, plus one, compared with the number of years you owned the property. If the home was your principal residence for all years except one, the whole gain is exempt.
• Flipping: a gain on a housing unit in Canada owned for less than 365 consecutive days before sale is deemed business income, and the principal residence exemption does not apply. This applies to dispositions after 2022.
• Rental or business use: a change in use is generally a deemed sale at fair market value. For a small partial change, such as a rented room or home office, there is no deemed disposition if the use is relatively small, there are no structural changes and no capital cost allowance is claimed.
• Another home designated: only one property per family unit can be designated for each year from 1982 onward.

The flipping rule has exceptions, including a sale that can reasonably be considered to occur due to, or in anticipation of, a death, a marriage or common-law breakdown (with the couple separated at least 90 days), serious illness or disability, an eligible relocation, or involuntary job loss. Whether one applies depends on your facts.

Also note that a home is personal-use property, so if you sell at a loss you cannot claim that loss.

If you forgot to designate in the year of sale

If you forget to designate in the year of sale, you ask the CRA to amend the return for that year. The CRA may accept a late designation in certain circumstances, 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 late-election penalty in the Income Tax Act 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. Because the penalty grows by month, acting sooner generally costs less than waiting.

What to do next

• Find your sale and purchase documents, including legal fees, commissions and records of major improvements.
• List each year you owned the home and whether it was your principal residence, rented or partly used for business.
• Check whether you owned the home for less than 365 consecutive days, which can trigger the flipping rule.
• Complete Form T2091(IND) and Schedule 3 with your T1 return for the year of sale.
• If a past sale was never reported, ask the CRA to amend that year's return as soon as you can.
• Speak with a lawyer or accountant if the home was rented, held in a trust, owned by someone who has died, or if you were not a Canadian resident for part of the time.

Frequently asked questions