Principal Residence Reporting
Step by step: the Schedule 3 box, which pages of form T2091(IND), and how to fix a missed designation.
The short version
- Report the sale of your home on the return for the year you sold it, even if the whole gain is tax-free.
- On Schedule 3, in the principal residence section, enter the year you bought the home, the sale price and the address, and tick the box that matches your designation.
- Designating the home for every year you owned it, or all but one? Complete only page 1 of form T2091(IND). For fewer years, complete the whole form to work out the taxable part.
- Forgot? Ask CRA to amend the return. A late designation can cost $100 for each full month late, up to $8,000, and without one the gain may be taxable.
- Changing your home to a rental or business use (or the reverse) is a deemed sale that also has to be reported.
How to Report a Principal Residence Sale
The tax on selling your home is usually zero. The paperwork isn't, though there's not much of it. Since the 2016 tax year, CRA allows the principal residence exemption only if you report the sale and designate the property on your return. It's a ten-minute job, and skipping it is one of the more expensive ways to save ten minutes. Here's exactly what goes where.
Step by Step
- Gather the numbers: the year you bought the home, the sale price (proceeds of disposition, from the statement of adjustments) and the full address or legal description.
- Count the years: the years you owned it, counting the year you bought and the year you sold, and the years you're designating it as your principal residence.
- Schedule 3, principal residence section: tick the box for designating the property as your principal residence for all years (or all years but one), or the box for fewer years, and enter the year of acquisition, the proceeds and the description.
- Form T2091(IND): complete page 1 if you designate all years or all but one; complete the whole form if you designate fewer years. The taxable part then goes on Schedule 3 as a capital gain.
- Keep the paper: purchase and sale documents, the statement of adjustments, receipts for improvements, and a note of which years you designated, for at least six years after the sale.
Most tax software asks these questions in a principal residence screen. If yours didn't ask, check the Schedule 3 it produced before you file.
Want the form filled in for you?
Answer a few questions about the property and any other homes you owned. The SmartFile picks the box, works out the years and fills in form T2091(IND) and the Schedule 3 entries for you to check.
Which Box, Which Pages
| Your situation | Schedule 3 | Form T2091(IND) |
|---|---|---|
| Lived in it the whole time you owned it; no other property designated | Box for all years (or all but one) | Page 1 only |
| Bought a new home and sold the old one in the same year | Box for all years (or all but one), for the one you sold | Page 1 only (the plus-one covers the overlap) |
| Designated a cottage for some years instead | Box for fewer years | Whole form; taxable part to Schedule 3 |
| Rented the whole home for some years without an election | Box for fewer years | Whole form |
| Sold within 365 days, no life-event exception | The flipping rule applies: it's business income, not a capital gain | Not applicable |
Not sure how many years to designate, especially with a cottage? That choice is explained on the principal residence exemption.
Other Events You Have to Report
- Changing your home to a rental or business use, or a rental back to your home. CRA treats it as a sale at fair market value, unless you make an election to defer it. Report the deemed sale in that year.
- Granting an option to buy the home.
- A home owned by a trust, which uses form T1079 instead.
- A death: the deceased's final return reports the home as sold at market value, with the designation made on form T1255.
When someone dies, the executor makes this designation on the final return; see real estate tax in Canada for the overview.
If You Forgot to Report It
Don't wait for CRA to find it; the sale was reported to the land registry, and the land registry doesn't keep secrets.
- Ask CRA to amend the return for the year of the sale, through Change My Return or form T1-ADJ, adding the Schedule 3 entries and form T2091(IND). See how to change a tax return.
- CRA can accept a late designation. The penalty is the lesser of $8,000 and $100 for each complete month from the original filing due date to the date of your request. CRA may waive or reduce it in some cases.
- If the sale isn't reported, CRA can reassess it beyond the normal three-year period, so an old missed designation doesn't simply expire.
CRA denied your principal residence exemption?
If a reassessment taxed your home sale, you have 90 days from the notice date to object. The SmartFile organizes the evidence that you lived there and drafts the objection.
Mistakes We See
- Not reporting because "it's tax-free anyway."
- Designating all years for a house that was rented out for several of them.
- Both spouses designating different properties for the same years.
- Using the purchase price instead of the sale price as the proceeds.
- Forgetting that a sold cottage needs the same reporting, and usually some tax; see capital gains tax in Canada.
Before you file the year of a sale, Return Check confirms the designation is on your return. The bigger picture is on selling your home and taxes, and a CRA letter about the sale can be read by the document analyzer.
Principal Residence Reporting Questions
How do I report the sale of my principal residence?
On Schedule 3 of your return for the year of the sale, in the principal residence section: tick the box for your designation and enter the year you bought it, the proceeds and the address. Also complete form T2091(IND).
Do I need to fill out form T2091 if my home was always my principal residence?
Only page 1, if you designate the home for all the years, or all but one, that you owned it.
What is the penalty for not reporting the sale of a principal residence?
CRA can accept a late designation for a penalty of the lesser of $8,000 and $100 for each complete month late. Without a designation, the gain may be taxable.
Do I have to report changing my home to a rental?
Yes. A change in use is a deemed sale at fair market value that must be reported, unless you make an election to defer it.
What form does an executor use for the deceased’s home?
Form T1255 is used to designate a principal residence on the final return of a deceased individual.
How does CRA know I sold my house?
CRA receives property sale information from provincial land registries and other third parties, and reporting the sale is mandatory even when the gain is tax-free. Not reporting can cost the exemption or a penalty.
Sources: CRA, Reporting the sale of your principal residence for individuals; Form T2091(IND); Principal residence and other real estate. Checked October 2026. Schedule 3 box numbers and wording change between years, so we describe the boxes rather than number them.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.