Did you sell your home in 2016? You need to include that on your tax return this year!
For decades, the rule was that when you sell your principal residence, not only do you not have to pay capital gains tax on the sale, but you didn’t have to let the CRA know. Why would they need to know if you sold your house when you’re not paying taxes on it?
However, with more people flipping houses and having secondary residences such as cottages, they’re facing the issue that people aren’t telling the CRA. One of the problems is that people are selling one home, claiming it’s the principal residence and then years later selling the other home, also claiming it was the principal residence.
So now the CRA wants you to disclose your principal residence on your taxes and tell them when you sell your home. The rules actually changed last year, but the government was holding off on the penalty for not disclosing (up to $8000!), but they will start fining for it this year.
Where this can cause confusion is where adult children are preparing tax returns for parents who have moved into assisted living or have passed away. If the principal residence was sold during the year, this has to be disclosed.
If you have any questions about this, please don’t hesitate to get in touch.
Ian Edmonds is a CPA, CA and CPA (NC) working in Toronto with small and medium-sized businesses, individuals, and not-for-profit organizations in Canada and the US to provide personalized, approachable tax and accounting advice and services and help people avoid expensive tax situations.