I wanted to talk today about the new tax changes to the principal residence program that will affect all Canadian homeowners.
Recently in the news, there has been a lot of talk about loopholes in our tax system benefiting foreign investors and the changes that have been made to prevent this. The fact is, these changes affect all Canadian residents. You may be familiar with the Principal Residence Exemption, which allows all Canadians to have a tax break if they make a profit on the sale of their principal residence. Because of this exemption, many Canadians do not report this amount on their tax returns.
This is where the change comes in. The CRA will now require all sales to be reported on your tax return whether you owe taxes or not. Even though these changes were just announced, all property sales that were made since January 2016 must be reported in your tax return. If you fail to report the sale of your residence in 2016 or the years to come, you won’t be eligible for the Principal Residence Exemption.
If you forget to designate your home as your principal residence, you can ask the CRA to amend it, which can also result in penalties of up to $8,000. This becomes especially problematic for anyone who owns more than one property. If you own a vacation home or rental property, you will need to meet with your accountant as soon as possible to make sure everything is recorded properly with CRA. Make sure you are tracking all costs of home improvements you’re making by keeping track of all record and receipts, because you may be able to use these amounts toward the adjusted cost based off of your property to reduce taxes on it if you’re not able to claim the principal residence amount either partially or completely.
I hope this information was helpful to you and can help you save time and money when you sell a property. If you have any questions, give me a call or send me an email today. I would be happy to help.