Canadian Real Estate Tax Guide
Understand Canadian tax rules for buying, owning, renting, renovating and selling real estate.
The short version
- Selling your home is usually tax-free under the principal residence exemption, but you still have to report the sale.
- Selling a cottage, rental or land usually means a capital gain: half of it is taxable.
- Owned a home less than 365 days? The flipping rule can make the whole profit taxable as business income.
- New homes carry GST/HST; resale homes generally don't. Land transfer tax is provincial (and municipal in Toronto).
- Rentals have their own rules: rental income, expenses and depreciation that comes back when you sell.
Canadian Real Estate Tax, From Offer to Sale
Real estate is where good people lose the most tax money without noticing: a sale nobody reported, a cottage designated the wrong way, a rental that got “moved into” for a year without anyone telling CRA. None of it is complicated once you see the whole map. Here it is.
Buying
- Land transfer tax is charged by your province (and by the City of Toronto on top of Ontario's). It's not income tax, but for a rental or a business property it becomes part of your cost, which lowers your future capital gain.
- GST/HST applies to new homes and substantially renovated ones, generally not to resale homes (see GST/HST on new homes and the new housing rebate). Rebates can give part of it back; for Ontario, see OntarioHSTRebates.ca.
- First-time buyers can use a First Home Savings Account, the RRSP Home Buyers' Plan, and the $10,000 home buyers' amount. See Canadian tax deductions and Canadian tax credits.
- Buying with parents, siblings or a partner? Ownership shares and title decide who pays tax later; see buying property with family. Buying land to build on? See vacant land tax issues.
Owning
Property tax, mortgage interest and insurance on your own home are personal costs: not deductible. They become deductible, in proportion, when part of the property earns rental or business income. If you rent out a room or basement, see renting part of your home; for the whole place, read our rental property tax guide before you file.
A note on the Underused Housing Tax: since 2023, most Canadian owners don't have to file it, and the 2025 federal budget proposed eliminating it starting with the 2025 calendar year. We're not certain the change has passed into law as you read this; check CRA's Underused Housing Tax page if you're a foreign owner or hold property through a corporation, partnership or trust.
Renovating
Improvements to a rental or business property are added to its cost; repairs are deducted in the year. On your own home, renovations aren't deductible, with two exceptions worth knowing: the Home Accessibility Tax Credit (up to $20,000 of eligible work for a senior or a person with a disability) and, for major renovations that count as “substantial,” GST/HST rebate rules. Keep every renovation receipt anyway. If the home ever becomes a rental or loses the principal residence exemption, those receipts reduce your gain.
Sold a home or cottage? Keep the most gain tax-free
The home and cottage SmartFile picks the best split of years between your properties and fills in Form T2091(IND).
Selling Your Home or Cottage
The full walk-through is on selling your home and taxes. Your family can designate one property per year as its principal residence. The tax-free share of the gain is (1 + years designated) divided by years owned. Every sale must be reported: a box at line 17900 of Schedule 3 and Form T2091(IND), even when no tax is owed. Our guide to the principal residence exemption for a home and cottage walks through it with real numbers, and the capital gains tax calculator runs yours.
The flipping rule. Since 2023, if you sell a home you owned for less than 365 consecutive days, the profit is generally business income (fully taxable, no principal residence exemption), unless the sale was caused by a life event such as a death, a separation, a new job, a disability or a birth in the family. Losses are deemed nil. Details on house flipping tax.
Selling a Rental, Land or an Investment Property
Building a house to sell? See builder tax rules. Severing a lot from your property? See selling part of your property. Moving property to your kids? See gifting property to children. The gain is the sale price minus your cost (purchase price, closing costs, improvements) and selling costs. Half is taxable. For a rental, the depreciation you claimed also comes back as fully taxable recapture. Our guide to capital gains tax on a rental property has a full worked example.
Sold a rental? Get the exact numbers for your return
The rental sale SmartFile works out recaptured CCA and the capital gain, estimates the tax, and prints the T776 and Schedule 3 lines.
Changing How You Use a Property
Turn your home into a rental, or move into your rental, and CRA treats you as having sold and bought it back at fair market value that day. That can create a gain years before you actually sell. Special elections can defer it in many cases, but they have filing deadlines and conditions. If you've moved in or out of a property, read change of use rules, converting your home to a rental or converting a rental to your home before you file, or get the right tax help.
Inheriting Real Estate
When someone dies, they're treated as having sold everything at fair market value right before death, and the tax is paid on their final return, not by the heirs. A principal residence can shelter the home; a cottage or rental usually creates a taxable gain that the estate has to pay before anyone gets the keys. From the heir's side, see inheriting a house in Canada, and for the family cottage, cottage capital gains.
Non-Resident Sellers
If the seller isn't a resident of Canada, the buyer can be on the hook for part of the seller's tax unless CRA issues a clearance certificate. That's a lawyer-and-accountant file from day one.
Real Estate Tax Questions
Do I pay tax when I sell my house in Canada?
Usually not, if it was your principal residence for every year you owned it. You still have to report the sale on Schedule 3 and Form T2091(IND).
How is a cottage taxed when it is sold?
Half the capital gain is taxable, unless you designate the cottage as your principal residence for some years. A family can designate only one property per year, so the choice between home and cottage matters.
What is the house flipping rule?
Since January 1, 2023, profit on a home owned for less than 365 consecutive days is generally treated as business income and fully taxed, unless a listed life event caused the sale.
Can I deduct mortgage interest on my home?
Not on your own home. Interest on money borrowed to buy a rental or business property can be deductible.
Is there GST/HST on a resale home?
Generally no. GST/HST applies to new and substantially renovated homes, often with partial rebates.
Sources: CRA, Completing Schedule 3 (including Part 1, flipped property); Form T2091(IND); Underused Housing Tax: what has changed; Budget 2025, tax measures. Checked October 2026.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.