Principal Residence
When you dispose of a property that has been your principal residence for X amount of years, you will need to report the disposition to the CRA when you file your income tax. The good news is that the Government of Canada allows the taxpayer to be exempt from paying any capital gains from a disposition of property if the taxpayer meets the following criteria:
- The property must be a housing unit
- You must own the property (either alone or jointly)
- You, your spouse or children must inhabit the property
- You must designate the property as a principal residence
Rental Income (Changing Principal Residence to Rental Property)
A taxpayer can make an election to not have his/her principal residence changed, even though the property has been converted into a rental property. The taxpayer would not have to report a capital gain on their tax return, instead any capital gain will have to be reported on any future disposition. The taxpayer can also designate the rental property as their principal residence for four (4) years.
Income From Principal Residence
If you decide that you would like to rent out a room in your home or even the basement, you can do so. The residence will still be exempt from capital gains as long as you make no structural changes, the income is incidental to your use of the property, and you don’t claim depreciation on the property.
This is general comment, and you should contact Tax Partners for any questions by sending an email to [email protected] or (905) 836-8755.
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