If you sold a home in 2016 there is a new tax requirement regarding the principal residence exemption you need to be aware of when filling your 2016 income taxes.
This rule change is part of a tax-evasion crackdown meant to reduce the number of Canadians who are abusing the primary residence exemption by not reporting the sale of homes. Without the requirement to disclose the sale of a primary residence, house flippers had an easy time buying and selling property tax-free.
Today, we are going to outline what a principal residence is, what the new tax requirement is, what information needs to be reported, and where to get more information. Our knowledgeable realtors at The Dennis Team are always available to answer questions you have about a previous or upcoming home sale. Contact one of us today to answer your questions.
What is a Principal Residence?
For a property to qualify as a principal residence it needs to meet all of the following four conditions:
- The residence is one of the following housing units:
- A house
- A cottage
- A condominium
- An apartment in an apartment building
- An apartment in a duplex
- A trailer, mobile home, or houseboat
- Ownership of the property is alone or jointly with another person
- You, your current or former spouse or common-law partner, or any of your children lived in it at some time during the year
- You designate the property as your principal residence
How Does My Home Sale Affect My 2016 Taxes?
On October 3, 2016, the Government of Canada announced an administrative change to Canada Revenue Agency’s (CRA) reporting requirements for the sale of a principal residence. Starting with the 2016 tax year, which is due by April 30, 2017, you will be required to report basic information on your income tax and benefit return when you sell your principal residence to be eligible to claim the full principal residence exemption.
Unlike previous years, the new rules require you to report every sale of a principal residence on your tax return, whether you owe tax or not.
What Information Do I need to Report?
The basic information you will need to report is: the date of purchase, the proceeds of disposition (sale price) and a description of the property. This information will need to be reported on the Schedule 3 of your 2016 taxes.
If you’re like me and have already submitted your 2016 income taxes, you can still ask the CRA to amend your tax return to include the sale of your principal residence. The CRA will often accept the late designation but penalties could apply depending on when you contact them. The sooner the better though, as the CRA can impose a penalty of $100 for every full month since the filling deadline, capped at $8,000.
Where To Get More Information?
The CRA is committed to providing taxpayers with up-to-date information. They encourage taxpayers to check its webpages often, as all new forms, policies (like this one), and guidelines will be posted as they become available.
Our realtors are always available to help direct you to information or formulate the right questions to ask your accountant.
Knowledgeable Realtors at The Dennis Team
Our real estate agents at The Dennis Team pride themselves on staying current with all matters regarding the local and national real estate markets. If you have a question regarding any real estate matter, contact one of our realtors today.