Principal residence exemption
When you sell your principal residence, did you know that any profit (capital gain) may be exempt from taxes? In fact, if your home was your primary residence for every year that you owned it, you do not have to pay tax on the capital gain.
Your principal residence can be any of the following:
- a house, cottage or condominium
- an apartment in an apartment building or a duplex
- a trailer, mobile home, or houseboat
In order for a property to qualify as your principal residence:
- You must own, or jointly own the property.
- You, your current or former spouse or common-law partner, or any of your children must have lived in the property at some time during the year.
To benefit from the principal residence exemption you must report the sale appropriately on your income tax and benefit return. How you do so can vary depending on whether the property you sold was your principal residence for the entire time you owned it. Only one property can be designated as a principal residence per tax year per family unit. A family unit includes you, your current or former spouse (or common-law partner) and any children under the age of 18.
Home buyers’ amount
You can claim the home buyers’ amount of up to $5,000 on your income tax and benefit return for a particular year if both of the following apply:
- you or your spouse or common-law partner acquired a qualifying home; and
- you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer).
You do not have to be a first-time home buyer if you are eligible for the disability tax credit or you acquired the home for the benefit of a related person who is eligible for the disability tax credit.
Eligible home buyers can complete line 369 of Schedule 1 of their income tax and benefit return.
Home Buyers’ Plan
You may be eligible to participate in the Home Buyers’ Plan which allows you to withdraw funds from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself. Budget 2019 proposes to increase the Home Buyers’ Plan withdrawal limit to $35,000, to provide first-time home buyers with greater access to their RRSP savings when purchasing a home. This amount is available for withdrawls made after March 19, 2019. Buyers have up to 15 years to repay the amounts they withdraw.
To qualify for the Home Buyers’ Plan, you have to meet these two conditions:
- you are a first-time home buyer
- you have a written agreement to buy or build a qualifying home for yourself
You are considered a first-time home buyer if, in the preceding four-year period, you did not live in a home that you or your spouse or common-law partner owned. You must intend to live in the qualifying home as your principal residence within one year of buying or building it.
Home Buyers’ Plan for persons with disabilities
You do not have to be a first-time home buyer to participate in the Home Buyers’ Plan if you are eligible for disability tax credit or if you are helping a related person who is eligible for the credit buy or build a home. The purchase or construction must be done to allow a person with a disability to live in a home that is more accessible or better suited to their needs.
GST/HST rebate on new homes in Canada
If you bought a newly constructed home from a builder, you may be able to claim a new housing rebate for some of the goods and services tax/harmonized sales tax (GST/HST) you paid.
If you constructed or substantially renovated a house for use as your primary place of residence, you may also be eligible for this rebate.
For more information on the GST/HST new housing rebate, refer to guide RC4028, GST/HST New Housing Rebate.
Home accessibility expenses
If you are a qualifying individual (65 years of age or older at the end of 2017 or eligible for the disability tax credit) or an eligible individual claiming certain tax credits for a qualifying individual, you may be able to claim eligible expenses paid for renovations that make your dwelling more accessible.