Report The Property I Live In?
Yes, it’s true. It’s in the playbook, but never strictly enforced until the filing of the 2016 tax return.
Starting with the 2016 taxation year, the sale of a principal residence must be reported. This also applies for deemed dispositions due to a change in use of the property (such as your personal home now being used as a rental property).
What Is Considered A Principal Residence?
A principal residence is property where the taxpayer, taxpayer’s spouse or common-law partner, or any of the taxpayer’s children lived in at some time during the year.
Your principal residence can be any of the following types of housing units:
- a house;
- a cottage;
- a condominium;
- an apartment in an apartment building;
- an apartment in a duplex;
- or a trailer, mobile home, or house boat
To designate a property as the principal residence, it does not have to be the place where the taxpayer lives all the time. The principal residence also does not have to be located in Canada. If you purchased a vacation property, then you could designate it as your principal residence for years in which you resided there at some time during the year.
What Needs To Be Done If I Have Sold My Principal Residence?
The disposition of a principal residence needs to be reported on Form T2091. If there is more than one owner of a principal residence, each will report the sale using only their share of the proceeds of sale and their portion of the cost. For example, when a home is owned jointly by a couple and each owns 50%, each will report 50% of the proceeds.
How Is It Calculated?
The principal residence exemption calculation formula is:
(# of years home is principal residence + 1) x capital gain
# of years home is owned
Penalty!
Canada Revenue Agency can normally (with some exceptions) go back and review or change an already filed tax return three years from the initial Notice of Assessment date. However, under the principal residency deduction, Canada Revenue Agency can reassess outside of that normal reassessment period if the taxpayer does not report a disposition.
If the disposition of a principal residence is not reported with the filing of your income tax return in the year of disposition, a late filing penalty can be imposed, and it is a big one!! Make sure that if you have sold a principal residence during the year, you inform us.