CRA forms
Form T2091(IND) Explained: Designating a Principal Residence
365 daysthe minimum time to own a home before selling it, in most cases, for the gain to qualify for the principal residence exemption rather than be taxed as a flip.
Sources checked October 20263 min read
Key points
- A home sale has to be reported, even when the gain is fully exempt
- Only one property per family unit can be designated for each year
- The plus one rule covers the year you sell one home and buy another
- Homes held less than 365 days are generally taxed as flipped property
Reporting the sale of a home
The gain on selling a principal residence is usually tax free, but the sale still has to be reported. In the year of the sale, the seller completes the principal residence designation section of Schedule 3, Capital Gains or Losses, at line 17900, and designates the property on Form T2091(IND). Paper filers attach the form; electronic filers keep it in case the CRA asks for it.
If the property was the principal residence for every year it was owned, only the description section of Form T2091(IND) is needed and no gain is reported. If some years are not designated, for example because the home was rented out or another property was designated for them, the form works out the part of the gain that is taxable.
The rules that shape the exemption
A few rules decide how much of a gain the exemption covers.
- Only one property can be designated for each year, and since 1982 a family unit, meaning a spouse or common law partner and children under 18, can designate only one between them
- The exemption formula adds one extra year, the plus one rule, so someone who sells one home and buys another in the same year is covered for both
- A cottage or a condo can qualify as well as a house, as long as the owner or their family ordinarily lived in it during the year
- A seller who was not resident in Canada for part of the time they owned the property may get a reduced exemption, or none
Flipped property
For sales after 2022, a home in Canada, or a right to acquire one, owned for less than 365 consecutive days is generally treated as flipped property. The profit is business income, fully taxable, and the principal residence exemption does not apply. Exceptions cover sales caused by, or made in anticipation of, certain life events, such as a death, a separation, a new job or a new child.
Forgetting the designation
Since 2016 the CRA allows the exemption only when the sale and the designation are reported on the return. A seller who forgot should ask the CRA to amend the return for the year of the sale. The CRA accepts a late designation in certain circumstances, but a penalty may apply, so reporting the sale in the year it happens is by far the cheaper course.
Quick answers
Do I have to report the sale of my home if the gain is tax free?
Yes. The sale goes on Schedule 3 and the property is designated as your principal residence, even when no tax is owed.
Can a couple each designate a different home for the same year?
No. Since 1982 a family unit can designate only one property for each year.
What if I sell a home I owned for less than a year?
Unless a life event exception applies, the profit is generally taxed as business income and the principal residence exemption is not available.
Related pages
Official sources
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Important. This article provides general educational information, not legal or tax advice for a specific business. Rules, administrative policies, rates and deadlines can change. Confirm your facts and current obligations with the responsible government agency and a qualified adviser.