Tax Tip: Reporting the Sale of Your Principal Residence is Now a Must
On October 3, 2016, the government announced a change to the reporting requirements when a person sells their principal residence. In past, when your principal residence was sold, you did not have to report the sale on your Income Tax Return. This was because the full amount of any capital gain realized was tax exempt.
Starting in the 2016 taxation year, all individuals will be required to report basic information on their Tax Return when there is a sale of the principal residence, even though the sale will continue to receive the full principal residence exemption.
The information that will need to be included in your Income Tax Return will include the date of acquisition, a description of the property and the amount realized at the time of the sale. This information will be recorded in Schedule 3 part of your Income Tax & Benefit Return.
CRA will only allow the principal residence exemption if you report the sale and designation of principal residence in your Income Tax Return. If you forget to make the designation in the year of the sale, it is important to later ask CRA to amend your Tax Return for that year, but there may be a penalty. The penalty will be the lesser of the following amounts:
- $8,000.00; or
- $100.00 for each complete month from the original due date to the date your request was made in a form satisfactory to CRA.
Since this is new, CRA’s indication is that they will not be imposing a penalty for a late filing of a principal residence designation except in the most excessive of cases.
More information concerning this important change is available on the CRA website or you can contact any member of the LMR Family Law Practice Group who will be pleased to answer any questions you might have.[ssba]