Principal residence

The principal residence exemption is an income tax benefit that generally provides you an exemption from tax on the capital gain realised when you sell the property that is your principal residence. Generally, the exemption applies for each year the property is designated as your principal residence.

Starting with the 2016 tax year, individuals who sell their principal residence will have to report the sale on Schedule 3, Capital Gains of the T1 Income Tax and Benefit Return. Reporting will be required for sales that occur on or after January 1, 2016.

If the taxpayer does not report a disposition of principal residence, Canada Revenue Agency (CRA) can reassess a taxpayer outside of the normal 3 year reassessment period.   

If the disposition of the principal residence is reported late, a late-filing penalty can be imposed @ $100 per month to a maximum of $8,000.