The federal government has recently made some changes to the Canadian tax system regarding the capital gains from selling residences. Some people are quite worried about what these changes, which you can find directly from the CRA, may come to mean when they sell their homes, but you shouldn’t panic. These changes will not greatly affect most homeowners, who only own a single home they live in.
What will stay the same:
The capital gains tax exemption from selling a principal residence will not change. This means that any profit you make on selling your home, as long as it is your primary residence, will be sheltered from tax. People who were concerned that selling their house after the new regulations come in would cost them a lot of money can be reassured, that part of the code has not changed.
What will change:
The main thing that has changed is that Canadians will need to report all property sales, along with a few other details such as dates of acquisition and sale, the profits from the sale, and a description of the property on their tax return. Before, Canadians did not need to provide this information when they sold their primary home. Forms to fill in this information will be added to Canadian tax forms once the changes take effect.
People who own multiple properties will need to designate one as their primary residence, which they will need to actually occupy, and the rest will not be subject to capital gains protection. The change to the tax code will also affect people who only live in a residence for a short period of time, such as home flippers or “serial home builders” and people who live in one part of their residence but rent out other parts. In these cases the property may be classified as a profit making residence and thus will not be eligible for the residential tax exemption.
What this all means:
The main change to most people will simply be that they have to report any property sale, even if it is the only home they own. For people who own more than one property, they will need to designate one residence as their primary residence, and will have to maintain residence there for at least some portion of the year. CRA will also have the authority to audit properties that people have designated as a primary residence when CRA does not think people actually resided there. This means that people who own multiple properties and want to get the most tax savings should consult with a professional to determine which property they should live in.
Overall, these tax changes will hardly affect the average Canadian. However, home flippers, landlords, and other people who make money off of having multiple properties will likely find their profits reduced, as CRA removes the capital gains tax shelter from a higher number of properties than before.
The post Primary Residence Tax Exemption appeared first on Team Realty.
Source: Blog