- A capital gain is the proceeds minus the adjusted cost base and selling expenses, reported on Schedule 3.
- Proceeds, cost base and expenses are each converted to Canadian dollars at the exchange rate that applies to that item.
- A federal foreign tax credit may help reduce double taxation on foreign tax you paid.
If you live in Ontario and sell a home or land in another country, you generally still report the sale on your Canadian return. The other country may also tax the sale, which is why people worry about being taxed twice.
This article explains how the gain is worked out in Canadian dollars, how foreign tax credits work, and where tax treaty rules fit in. It cannot cover the other country's rules, so you will also want local advice there.
Working out the gain
A capital gain is the proceeds of disposition minus the property's adjusted cost base (ACB) and any outlays and expenses of selling it. You report capital gains and losses on Schedule 3, and the taxable capital gain goes on line 12700.
The capital gains inclusion rate for 2025 is 50%, so half of a capital gain is taxable. Check the current CRA guide for the year of your sale.
Converting to Canadian dollars
For property bought or sold in foreign currency, you convert each part separately.
- Proceeds: the exchange rate in effect at the time of the sale.
- Cost base: the rate on the purchase date.
- Expenses: the rate when they were incurred.
Because the rates differ, a gain can exist in Canadian dollars even when the foreign-currency numbers look flat, or the other way around. Keep records of the dates and amounts of every purchase and expense.
Foreign tax credits and the treaty
If you were resident in Canada at any time in the year and paid foreign tax on income you reported, you can claim a federal foreign tax credit on line 40500 using Form T2209. Use Form T2036 for the provincial credit. For each country, the federal credit is generally the lesser of the foreign income tax you actually paid and the Canadian tax otherwise payable on your net income from that country.
For U.S. property, the Canada–U.S. Tax Convention allows the U.S. to tax gains from selling real property (Article XIII). Under Article XXIV, Canada gives a deduction from Canadian tax for U.S. income tax paid on U.S.-source income. Where U.S. tax was paid, the CRA asks paper filers to attach a W-2 slip, a U.S. 1040 return and a U.S. tax account transcript, and electronic filers should keep these in case the CRA asks for them. U.S. filing and withholding rules should be confirmed with a U.S. tax adviser.
Other points that can apply
If the property was a rental, you may have recapture of capital cost allowance, reported on Form T776 (line 9947), in addition to a capital gain if it sold for more than its cost. You cannot have a capital loss on depreciable property, but a terminal loss may be deductible from rental income.
If you held the property at a cost above $100,000, you may also have had to file Form T1135. A vacation home used mainly as a personal residence is excluded from that form. Whether the principal residence exemption can apply to a home abroad depends on the facts, so confirm it with an adviser.
What to do next
- Gather the purchase and sale documents and the dates of each.
- Record the exchange rates that apply to proceeds, cost and expenses.
- Keep proof of any foreign tax paid, including assessments or transcripts.
- Note whether the property was ever rented out.
- Ask a Canadian accountant or lawyer, and a local adviser abroad, to review the filings together.
Frequently asked questions
Do I report the sale of a foreign property in Canada?
Generally yes. You report the capital gain or loss on Schedule 3, and the taxable capital gain goes on line 12700.
Which exchange rate do I use?
Convert proceeds at the rate in effect at the time of the sale, the cost base at the rate on the purchase date, and expenses at the rate when they were incurred.
How do I avoid being taxed twice?
You may be able to claim a federal foreign tax credit on line 40500 using Form T2209 for foreign tax you paid. The federal credit is generally the lesser of the foreign income tax paid and the Canadian tax otherwise payable on your net income from that country.
Does the Canada–U.S. treaty stop the U.S. from taxing the sale?
No. The treaty allows gains from selling U.S. real property to be taxed in the U.S.. Canada then gives a deduction from Canadian tax for U.S. income tax paid on U.S.-source income.
Sources
- CRA Guide T4037, Capital Gains — canada.ca
- CRA Guide T4036, Rental Income — canada.ca
- CRA – Foreign Income Verification Statement (T1135) — canada.ca
- CRA – Line 40500 Federal foreign tax credit — canada.ca
- Department of Finance – Canada–U.S. Tax Convention (consolidated) — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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