Taxes and your principal residence

There aren’t many tax shelters still available in Canada today. Your principal residence, however, is one tax shelter that can’t be ignored.

The tax rules that deal with your principal residence can be complex, yet this bulletin has been designed to explain in down-to-earth language many of the tax issues that you face if you own a principal residence.

It’s a well-known fact that if you sell your principal residence while you are a resident of Canada for tax purposes, any gain realized on that sale can be tax-free thanks to the principal residence exemption (PRE).

Since 1982, each family unit (which today includes you, your spouse or common-law partner, and any unmarried children under the age of 18) has been able to designate just one property as its principal residence for each year.

This means that, where your family unit owns more than one property which has appreciated in value, there could be some tax to pay on at least one of those properties in the future.

Prior to 1982, each individual was entitled to their own PRE, which would allow a family to shelter more than one property from tax. There may be an opportunity even today to shelter pre-1982 capital gains on more than one property, which we discuss in this bulletin.