Canada: Principal residence exemption; changes to capital gain treatment

Canada principal residence exemption

Individuals and trusts may be affected by changes to the principal residence exemption—amendments that will limit the ability of certain taxpayers to eliminate or reduce the capital gain on the sale of their home.

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The Finance Department on 3 October 2016 issued an announcement stating that, beginning with 2016, individuals will be required 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 3 October 2016. Finance said 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.

 

Read an October 2016 report [PDF 67 KB] prepared by the KPMG member firm in Canada

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