House Flipping Tax
How flipping profit is taxed: the 365-day rule and its exceptions, the business tests, a worked example and the GST/HST builder trap.
The short version
- Profit from flipping houses is generally business income: fully taxable at your marginal rate, not a capital gain taxed at half.
- Since January 1, 2023, the flipping rule makes this automatic for residential property (including assignments) owned less than 365 consecutive days, unless a life event caused the sale. The principal residence exemption doesn't apply, and a loss is deemed to be nil.
- Owning longer than 365 days doesn't make a flip a capital gain. If you bought to resell, CRA can still call it business income under the old case-law tests.
- Substantially renovating or building and selling can make you a "builder" for GST/HST: the sale becomes taxable even though used homes are normally exempt.
- CRA runs dedicated real estate audit projects, and land registry and platform data make sales easy to find.
House Flipping Tax in Canada
Flipping looks great on television: buy ugly, renovate for six weeks, sell pretty, pop champagne. The tax episode comes later and doesn't make the highlight reel. In Canada, flipping profit is taxed like wages from a job, not like an investment gain, and a home you lived in for a few months doesn't make it tax-free. Here's how the rules work and what the numbers look like.
The 365-Day Flipping Rule
For sales after 2022, if you sell a housing unit in Canada (or the right to buy one, in an assignment) that you owned for less than 365 consecutive days, the profit is deemed business income. No principal residence exemption, no 50% inclusion, and a loss counts as zero. It doesn't apply if the sale happened because of a life event:
- Death of you or a related person
- A new household member (birth, adoption, caring for a parent)
- Breakdown of a marriage or common-law relationship (separated at least 90 days)
- A threat to personal safety
- Serious illness or disability of you or a related person
- A new job (or self-employment) at a location at least 40 km closer, or an involuntary job loss
- Insolvency
- Destruction or expropriation of the property
The exceptions get you out of the automatic rule, not out of the question: CRA can still look at whether you bought to resell. For the ordinary home sale rules, see selling your home and taxes.
Beyond 365 Days: Was It a Business?
Before 2023, and still today for longer holds, CRA and the courts ask whether the purchase was an "adventure or concern in the nature of trade". They look at:
- Your intention when you bought: to live in, to rent, or to resell?
- How long you held it, and whether you ever lived in it or rented it
- How many properties you've bought and sold, and how often
- Your connection to real estate (agent, builder, contractor, developer)
- How the purchase was financed, and whether it could have produced rental income
- Renovations aimed at resale, and listing it soon after buying
A contractor who renovates and sells a house every year or two, living in each briefly, is a textbook case of business income, whatever the holding period.
Will my sale be taxed as a flip?
Enter the dates you bought and sold, how you used the property and why you sold. The assistant checks the 365-day rule and its exceptions, the business tests, and estimates the tax both ways.
What a Flip Costs in Tax
| Ontario, 2026: bought for $600,000, sold 10 months later for $760,000 | Amount |
|---|---|
| Sale price | $760,000 |
| Less purchase price, land transfer tax and legal fees | ($610,500) |
| Less renovation costs | ($80,000) |
| Less carrying costs (interest, property tax, insurance, utilities) and real estate commission | ($42,000) |
| Profit: business income, fully taxable | $27,500 |
| Tax at a 43.41% marginal rate (salary around $120,000) | about $11,940 |
| Same profit as a capital gain (half taxable) | about $5,970 |
Business income from a flip also counts as self-employment earnings for CPP if you haven't already maxed out CPP through a job. Unlike a capital gain, though, a flipping business can deduct its real carrying costs, as shown above. Your rate is on marginal tax rate; see capital gains tax for the comparison.
GST/HST: The Builder Trap
Building to sell has its own page: builder tax rules. Selling a used home is normally exempt from GST/HST. But if you substantially renovate a house (generally 90% or more of the interior replaced) or build one, and then sell it, you're a "builder" and the sale is taxable: 13% HST in Ontario on the price, minus any input tax credits. The buyer may get a new housing rebate, and the price has to account for the tax. Flippers who do gut renovations are caught by this regularly. Check the 90% test before you start demolition; Ontario owners can read more on OntarioHSTRebates.ca, and see the GST/HST guide.
Get your GST/HST set up right the first time
The GST/HST SmartFile runs both $30,000 tests on your sales, compares the quick method with the regular method, and fills in form GST74 if the quick method wins.
Reporting a Flip
- Business income goes on form T2125 in the year of sale: proceeds, minus the cost of the property (as inventory), renovations and carrying costs.
- Records: purchase and sale documents, every renovation invoice, carrying cost statements. See business recordkeeping requirements.
- Several flips? It may be time to operate through a corporation; see small business taxes.
- Missed reporting one? CRA can reassess beyond the usual three years where a sale wasn't reported. See how to change a tax return.
If CRA has already reassessed a sale as business income, you have 90 days to object; see notice of reassessment: what to do. The overview of property tax is on real estate tax in Canada.
House Flipping Questions
How is house flipping taxed in Canada?
Profit from flipping is generally business income, fully taxable at your marginal rate. Since 2023, residential property sold within 365 days of purchase is automatically treated as business income unless a life event caused the sale.
What is the 365-day flipping rule?
For sales after 2022, profit on a housing unit or assignment owned for less than 365 consecutive days is deemed business income, with no principal residence exemption, and any loss is deemed nil, unless a listed life event applies.
If I own a house more than a year, is it a capital gain?
Not necessarily. CRA can still treat the profit as business income if you bought the property to resell it, based on your intention, history and conduct.
Do I charge HST when I sell a flipped house?
Not on a typical used-home sale. If you substantially renovated or built the home, you may be a builder, and the sale can be subject to GST/HST.
Can I deduct renovation costs on a flip?
Yes. Renovations, carrying costs, commissions and closing costs reduce the business income from the sale.
Sources: CRA, Residential property flipping rule; Principal residence and other real estate; Guide T4002. Checked October 2026. The example is illustrative; the marginal rate is from our 2026 Ontario rules engine. GST/HST builder rules are summarized and depend on the facts.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.