Tax Changes and their implications on Homeowners
Friday Oct 28th, 2016
October has been a month of change in the real estate industry. The Hisey-McDermott team has had many conversations with clients regarding some of the government imposed changes to homeowners, so we thought we’d provide some information as well as additional resources to help you navigate.
What you need to know about the capital gains changes.
On October 3, 2016, the Government announced an administrative change to Canada Revenue Agency’s (CRA) reporting requirements for the sale of a principal residence. Typically, when you sell your principal residence or when you are considered to have sold it, it’s not a required reported sale and you do not have to pay tax on the gain of the sale. However, come next tax reporting period, around late April 2017, there will be a requirement for you to report the disposition of your principal residence.
To specify, the change is in the reporting of a sale, not in claiming the principal residence exemption. Any profit earned from the sale of the principal residence will still be exempt from tax.
John Sliskovic, private client services tax leader at Ernst Young LLP, stated, “for most Canadian residents, the new proposed requirement to report the sale of a principal residence will be a compliance exercise, but an important one,” he continued, “if the sale is not reported, the Canada Revenue Agency could reassess the tax return in regards to the sale at any time. And there will be a penalty for those who file their principal residence designations late.”
Bottom line, anyone who sold a home in 2016 will need to report the sale and file it with your T1 Income Tax and Benefit Return.
MoneySense has published two informative articles to help clarify these tax changes and answer some common questions. We’ve provide the links below. CRA also has helpful information on its website, link is also below.
There are many resources available to help navigate these changes, but it’s always a good idea to speak directly with an expert.
Canada Revenue Agency:
PS, if the MoneySense links don’t open directly to the article, open them in a private window. MoneySense online is subscription based.