In Canada, generally any profit on the sale of a principal residence is a tax-free capital gain, and any expenses incurred in the carrying costs (or costs incurred on a sale) are NOT tax deductible.
To qualify as a principal residence, the following requirements must be satisfied:
- The unit must be a residential housing unit.
- The unit must be solely or jointly owned with another person.
- At some point in time in the year in which the property was sold, the property MUST have been lived in by the owner or the owners spouse (current or former), common law partner or by any of the owner’s children. Until January 1, 2023, there was NO minimum time period that the property must be occupied, as long as it was occupied and not gaining an income, but beginning January 1, 2023, an owner must own a principal residence for at least 12 months BEFORE closing a sale in order to have a tax free capital gain. If owning less than one year, all profit will be taxable.
- You designate the property as your principal residence.
Generally, the value of land adjacent to the home, in excess of 1.24 acres (½ hectare) will not be included as part of a principal residence, unless such excess land was reasonably required for the use of the principal residence. Farms have special rules as noted in IT 120R6.
PLEASE NOTE: Be aware that it is now a requirement when filing Canada Income Tax returns to clearly show when a principal residence has been sold.