The CRA has implemented new reporting requirements for the sale of a principal residence. While you will still not have to pay tax on the sale of your home, if it meets the principal residence exemption requirements, you will have to report the sale of your principal for any sale on or after January 1, 2016. This will be reported on Schedule 3, Capital Gains of the T1 Income Tax and Benefit Return and you will need to include the date of acquisition, proceeds of disposition, and a description of the property.
What happens if you do not report the sale of a Principal Residence?
If you fail to report the sale of a principal residence, you will not be able to utilize the principal residence exemption that applies to your property, which could result in you having to pay tax on any gain from the sale.
If you forget to make a designation of your principal residence in the year that you sell it, the CRA can accept a late designation in certain circumstances. If you do forget to report the sale, it is important to contact the CRA to have your income tax return amended for that year. While the CRA may accept a late designation, the CRA does have the authority to apply the following penalty, which would be the lesser of either:
- $8,000; or
- $100 for each complete month from the original due date to the date your request was made in a form satisfactory to the CRA.
The CRA has said that for the sale of principal residences during the 2016 tax year, the penalty for a late-filing of a principal residence designation will only be assessed in the most excessive cases. To avoid even the chance of having to pay this penalty, include the sale of your principal residence on your income tax return, but if you forget, immediately notify the CRA to request that your income tax return be amended.