Do You Have to Report the Sale of Your Home if It Is Exempt? Canada

If you sold the home you lived in for as long as you owned it, you probably expect no tax. It is natural to wonder whether you still have to tell the CRA anything. Many people assume that a fully exempt sale simply does not appear on a tax return.

That is no longer the case. This article explains what must be reported, which forms are involved, and what you can do if the sale was left off a return.

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

Yes, the sale must be reported

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. The CRA allows the exemption only if the disposition and the designation are reported.

In other words, the exemption is not automatic. It is claimed on your return, and leaving the sale off can put the exemption at risk.

Which forms and where

Individuals, other than personal trusts, designate the property and calculate any gain on Form T2091(IND). Only page 1 needs to be completed if the property was the principal residence for all years owned, or all years except one.

• Schedule 3, Part 1: tick box 1 at line 17900 if the home was the principal residence for all years owned, or all but one; tick box 3 if it was not the residence for every year owned.
• Schedule 3, Part 2: report the sale.
• Line 13800: a gain on an income-producing portion.
• Line 15800: the gain per property, if more than one property was sold in the year.
• Form T2091(IND)-WS: the worksheet for reducing the gain after a prior capital gains election on Form T664 or T664 (Seniors).

Line numbers and form versions can change from year to year, so check the current Schedule 3 and form before filing.

Details that affect your numbers

The gain is proceeds minus the adjusted cost base and selling costs such as legal fees, transfer taxes and advertising, and half of a capital gain is taxable. If the home was sold as land and building, the selling price must be split between land and building on Schedule 3. A loss on a home cannot be claimed, because it is personal-use property.

A fully exempt result is not guaranteed in every case. Only one property per family unit can be designated for each year from 1982 onward. A home owned for less than 365 consecutive days before disposition can be a flipped property, treated as inventory with the gain taxed as business income, for dispositions after 2022. There are exceptions, such as death, serious illness or an eligible relocation. A personal trust files Form T1079 and must meet extra conditions.

If you did not report the sale

If you forgot to designate in the year of sale, 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, 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 multiplied by the number of complete months between the due date and the date of the application. The Minister may waive or cancel penalties or interest if the request is made within ten calendar years after the tax year ends.

Acting sooner keeps the penalty smaller, because it grows with each complete month.

What to do next

• Find the closing documents showing the sale price and selling costs
• Gather your purchase records and receipts for improvements
• Confirm no other property was designated for your family unit in the same years
• Complete Schedule 3 and Form T2091(IND) with your T1 return
• If a past sale was never reported, speak with a lawyer or accountant about a late designation request

Frequently asked questions