Selling Your Home and Taxes
When selling your home is tax-free, how to report it, the 365-day flipping rule and when part of the gain is taxed.
The short version
- If the home was your principal residence for every year you owned it, the gain on the sale is generally tax-free under the principal residence exemption.
- You still have to report the sale: tick the box in the principal residence section of Schedule 3 and complete form T2091(IND). Forgetting can cost a late-designation penalty, or the exemption itself.
- A home owned less than 365 consecutive days is caught by the flipping rule: the profit is fully taxable business income and the exemption doesn't apply, unless a life event caused the sale.
- If the home was rented out, used for business, or wasn't your principal residence every year (because you designated a cottage instead, say), part of the gain can be taxable.
- Selling a used home is generally exempt from GST/HST. Selling a new or substantially renovated home you built or renovated to sell is a different story.
Selling Your Home and Taxes
For most Canadians, the sale of the family home is the biggest tax-free gain they'll ever make. It's also a sale CRA wants to hear about, every time, in a box most people don't know exists. Here's when the gain is tax-free, when it isn't, and the paperwork that keeps it that way.
When the Sale Is Tax-Free
The principal residence exemption covers the gain for every year the home was your principal residence. A home qualifies for a year if you, your spouse or common-law partner, or your child "ordinarily inhabited" it in that year, and you designate it. A family (you, your spouse and your minor children) can designate only one property per year.
The exempt share of the gain is:
| Formula | What it means |
|---|---|
| (1 + years designated) / years owned x gain | The "plus one" lets you buy a new home and sell the old one in the same year without losing a year of exemption. |
Lived in the home every year you owned it, never rented it out, and no other property to designate? The whole gain is exempt. For a home and a cottage owned at the same time, you choose which one to designate for each year, and that's where planning pays; see the principal residence exemption for a home and cottage.
Sold your home or cottage this year?
The SmartFile works out the exempt share, picks the designation years that save the most, and fills in form T2091(IND) and Schedule 3 for you to check.
Reporting the Sale: Don't Skip the Box
- Schedule 3, principal residence section (line 17900): tick the box for designating the property as your principal residence for all years (or all years but one), and enter the year bought, the proceeds and a description.
- Form T2091(IND): required if you designate the property for fewer than all years, and recommended in any case so the calculation is on file.
- Forgot? Ask CRA to amend that year's return. CRA can accept a late designation, but may charge a penalty of $100 for each full month late, up to $8,000. And without a designation, the gain can be fully taxable, without the usual three-year limit on reassessing it.
The full step-by-step is on how to report a principal residence sale. To fix a past year, see how to change a tax return.
The Flipping Rule (Owned Less Than a Year)
Since January 1, 2023, if you sell a home (or the right to buy one, in an assignment) that you owned for less than 365 consecutive days, the profit is deemed business income: fully taxable, with no principal residence exemption and no 50% inclusion. A loss is deemed to be nil. The rule doesn't apply if the sale was because of a life event:
- A death in the family, or a household addition (birth, adoption, caring for an elderly parent)
- Separation of at least 90 days
- A threat to personal safety
- Serious illness or disability
- A new job or school at least 40 km closer, or an involuntary job loss
- Insolvency
- Destruction or expropriation of the home
Even past 365 days, CRA can still treat a quick resale as business income if buying to sell was the plan. See side hustle taxes for when an activity becomes a business. The full rule, with an example, is on house flipping tax.
When Part of the Gain Is Taxable
| Situation | Effect |
|---|---|
| You designated a cottage for some years instead | The home's gain for those years is taxable (half included in income) |
| You rented out the whole home for some years (see home to rental) | A change in use; part of the gain may be taxable unless you filed an election |
| You rented a basement suite or room | Usually still fully exempt if the rental is small, unchanged structurally, and you claimed no CCA; see Airbnb taxes |
| You ran a business from part of the home and claimed CCA | That part may lose the exemption |
| Land over half a hectare | Extra land is exempt only if needed to use and enjoy the home |
| You weren't a resident of Canada some years | Those years generally can't be designated |
If any of these apply, run the numbers on the capital gains tax calculator and read capital gains tax in Canada. Selling a rental property instead? See capital gains on rental property.
GST/HST and Other Costs
The sale of a used home is generally exempt from GST/HST. If you built a home, or substantially renovated one, and sell it soon after, you may be a builder for GST/HST purposes and owe tax on the sale; that's a professional question. Buying a new home in Ontario? The HST new housing rebates are covered on our sister site, OntarioHSTRebates.ca.
Real estate commissions and legal fees on a tax-free sale aren't deductible, because there's no taxable gain to deduct them from. If you're moving for work or school, some moving costs may be deductible; see moving expenses.
Non-Resident Sellers
If you're not a resident of Canada when you sell, you need a clearance certificate from CRA, or your buyer must hold back part of the price. Start that process early; see real estate tax in Canada.
Before you file the year of the sale, Return Check confirms the designation is on your return.
Selling Your Home 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. The gain is covered by the principal residence exemption, but you must still report the sale on Schedule 3 and form T2091(IND).
Do I have to report the sale of my principal residence?
Yes. Since 2016, every sale must be reported by designating the property as your principal residence on your return for the year of the sale.
What happens if I forget to report the sale of my home?
Ask CRA to amend the return. CRA can accept a late designation, but may charge a penalty of $100 for each full month late, up to $8,000.
What is the 365-day flipping rule?
Since 2023, profit from selling a home owned for less than 365 consecutive days is generally fully taxable business income with no principal residence exemption, unless the sale was caused by a qualifying life event.
Is there GST/HST on the sale of my house?
The sale of a used residential home is generally exempt. New or substantially renovated homes sold by a builder can be taxable.
Sources: CRA, Principal residence and other real estate; Residential property flipping rule; Income Tax Folio S1-F3-C2, Principal Residence. Checked October 2026. The late-designation penalty is CRA's published policy and is applied at its discretion. Change-in-use elections and the half-hectare rule are summarized; both have conditions.
Last reviewed October 4, 2026 against CRA and Government of Canada sources. How we check our facts.