Individuals and trusts may be affected by new changes to the principal residence exemption.
Individuals and trusts may be affected by new changes to the principal residence exemption that will limit the ability of certain taxpayers to eliminate or reduce the capital gain on the sale of their home. In an announcement on October 3, 2016, Finance also said that, beginning with 2016, individuals will now have to report the disposition of a property for which they claim the principal residence exemption in their income tax return (previously, individuals did not have to report the capital gain if the full gain was exempt).
The changes to the principal residence exemption are included in part of a seven-page Notice of Ways and Means Motion that Finance tabled on October 3, 2016. Finance says these measures, in addition to announced changes to the mortgage insurance rules and a consultation process on lender risk sharing for government-backed insured mortgages, are in response to the effect of low interest rates and shifting attitudes towards debt and indebtedness on the housing market, especially in Toronto and Vancouver.
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