Did you sell your home in 2016?
In the past when you sold or were deemed to have sold your principle residence there was no need to report it to the Canada Revenue Agency (CRA). On October 3rd, 2016 the Government announced an administrative change in reporting requirements. What this means is that starting with 2016 you will now be required to report information regarding the sale on your personal tax return in order to claim the principle residence exemption (PRE).
Thing you need to know:
The PRE allows an individual an exemption from tax on any capital gain realized on the sale of his or her principle residence. Starting with 2016 the sale will now need to be reported on Schedule 3 of the individual’s T1 personal tax return. If the residence was not the individual’s principle residence for the entire period owned then Form T2091 will still be required.
The new reporting rules will also be required for deemed dispositions. A deemed disposition occurs when you have a change in use for the property. A common change in use occurs when a principle residence becomes a rental property.
If you fail to report the sale of your principle residence on your tax return there can be tax consequences. The CRA will only allow the PRE if the disposition is reported. Currently there are proposed changes that will allow CRA to accept a late designation but a penalty of the lesser of $8,000 or $100 for each complete month from the original due date to the date your request was made.
If you need more information please contact one of our advisors.