What Is a Principal Private Residence (Canada)?

A principal private residence is a home a Canadian taxpayer or family maintains as its primary residence. A family unit can only have one principal private residence at any given time. In order to qualify, the property must be owned by the taxpayer or couple, or fall inside a personal trust.

Understanding Principa💯l Private Residences (Canada)

In Canada, when you sell a house for more than you bought it for, the government requires you to pay taxes on half of that profit. Those rules, ho𓄧wever, do not apply if the 🎐property is registered as your principal private residence.

A Canadian taxpayer may only designate one home as their principal private residence for a particular year. According to Canadian tax rules, a home can be designated as a principal private residence for each year in which a taxpayer, their 澳洲幸运5官方开奖结果体彩网:spouse, common-law partner, or their children were residents in Canada. The 澳洲幸运5官方开奖结果体彩网:Canada Revenue Agency (CRA) has three other requirements in order for a princi𒅌pal private residence to 🌱qualify:

• The taxpayer must own the property on their own, or jointly with their spouse or partner
• The property is "a housing unit, a 澳洲幸运5官方开奖结果体彩网:leasehold interest in a housing unit, or a share of the capital stock of a co-operative housing corporation"
• The taxpayer designates the property as a principal private residence

Virtually any type of physical residence qualifies, including houses, apartments, duplexes, cottages,🏅 houseboats, trailers, or mobile homes. The land on which the dwelling sits also qualifies for the exclusion within certain limits—, according to the CRA. This limit may be extended in certain cases if the municipality imposes a minimum lot size.

🌱Requirements for Principal Private Residences (Canaඣda)

As of the 2016 tax year, Canadian taxpayer-homeowners were required to report basic information on their principal private residences to qualify for the exemption. That includes the date of acquisition, date of sale, proceeds of 澳洲幸运5官方开奖结果体彩网:disposition, as well as a description of the property on their income tax and benefit return. This reporting requirement has applied to every property sold in Canada since 2016, even if the entire gain is fully protected by the princi🉐pal private&n🍸bsp;residence exemption.

The principal private residence is exempt from capital gains tax. However, taxpayers who sell their principal residence must still report the sale. It must also be designated as a private residence on of 🌄their tax return in order to qualify for the exemption, along with Form .

The federal government allows taxpayers to designate two properties as principal residences when they sell one and purchase another during the same year. The taxpayer must designate and report both. This rule is called the "plus 1" rule.

Special Considerations

If someone is unable to designate a home as their principal residence for all the years it is owned, a portion of any gain on its sale may be subject to tax as a 澳洲幸运5官方开奖结果体彩网:capital gain. The portion of the gain subject to tax is based on a formula that takes into account the number of years the home was owned by the taxpayer and how many of th𒉰ose years it was designated as a principal pri🦩vate residence.

For example, suppose a married couple owns two residences between them—a home in the city and a cottage in the countryside. Only one of these homes can be designated as a principal residence for each year. Before 1982, each spouse could designate a separate property as a principal residence for a particular year, provided the property was not jointly owned. However, that loophole was closed. 📖Couples and their unmarried minor children can now only designate one home in total as their princip🐷al private residence each year.

Taxpayers who use part of their residence for business purposes must reasonably split the selling price and the 澳洲幸运5官方开奖结果体彩网:adjusted cost base (ACB) between the portions used as a residence and to produce income. The CRA may consider the property as a residence if the business is secondary to the use of the house as a principal residence, there are no structural changes to the property, and there is no 澳洲幸运5官方开奖结果体彩网:capital cost allowance (CCA) c🤪laimed against the property. One example that fits this description is a home daycare facility.