May 1, 2017
Most people who own a home know that when they sell their home, the profit made is one of the few things that are not taxable in Canada. But things got a little more complicated last year, so read on to make sure you’re prepared.
In years prior to
2016 it was understood that your principal residence had an exemption that
eliminated any capital gains earned. What the definition of a principal
residence is and the nuances of that are for another day, and most likely
better handled by an accountant. What you do need to know though is on
October 3, 2016 the federal government announced that starting in the 2016 tax
year, the sale of a principal residence must be reported on your tax return in
order to claim the principal residence exemption.
The particular form to be used is called a Schedule 3 in order to claim the principal residence exemption. There is a penalty which can become as high as $8,000 for late filing, and if you fail to report the sale of your principal residence at all, you may be taxed on the capital gain.
If your home was your principal residence for the entire time that you owned it, the sale will only have to be reported on Schedule 3, where you will provide the proceeds of the sale (selling price), the year you bought your home, and address. If there is more than one owner, each will report the sale on Schedule 3, using only their share of the proceeds. So for instance, when a home is owned jointly by a husband and wife, each would own 50%, and accordingly report 50% of the proceeds on their taxes.
I bought a home in 2016. Any tax breaks for me?
Potentially yes. You may be able to take advantage of the first time home buyer tax credit (HBTC). You can claim $5,000 for the purchase of a qualifying home in 2016 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).
A qualifying home
is a housing unit located in Canada. This includes existing homes and
those being constructed. Single family home, semi-detached, townhouses,
mobile homes, condominium units as well as apartments in duplexes, triples,
fourplexes and apartment buildings all qualify.
You must also intend to occupy the home or you must intend that the related person with a disability occupy the home as a principal residence no later than one year after is acquired.
Of course this doesn’t mean you’ll be receiving a cheque for $5,000 from the government! This is a tax credit, not a rebate. So the actual amount coming back on your return will vary.
Courtesy of Chad Eliason – Quantas Mortgage Solutions