Sale of principal residence
In the past, Canadian taxpayers have enjoyed taking advantage of their principal residence exemption, generally, without having to file anything with their income tax return. Most taxpayers sell their principal residence without considering that a potential gain occurred, and the gain was reduced by the principal residence exemption.
For the sale of a principal residence in 2016 or later tax years, CRA will only allow the principal residence exemption if you report the sale and designation of principal residence in your income tax return.
If you forget to designate property as your principal residence, the CRA has the ability (under proposed changes), to accept a late designation in certain circumstances, but a penalty may apply.
The penalty is the lesser of the following amounts:
1. $8,000; or
2. $100 for each complete month from the original due date to the date your request was made in a form satisfactory to the CRA.
Due to the magnitude of this change, the CRA has communicated that they are focusing on educating taxpayers of this change before they start issuing penalties. The CRA has indicated that penalties will only be assessed in the most excessive cases. However, this is an administrative policy, and the CRA can issue a penalty at their discretion.
If you would like to know more about how this will impact your tax return, please contact us.
General Income Tax and Benefit Guide: http://www.cra-arc.gc.ca/E/pub/tg/5000-g/5000-g-e.html
1917 Chartered Professional Accountants is a Calgary based accounting firm focused on helping individuals and businesses with their financial reporting, taxation planning, and compliance.