What qualifies as a principal residence
A principal residence can be a house, cottage, condominium, apartment, trailer, mobile home or houseboat. It qualifies for a year if you own it alone or jointly, you, a current or former spouse or common-law partner, or a child lived in it at some point in the year, and you designate it. The land is generally included, up to half a hectare unless you can show you need more to use and enjoy the home.
If the property was solely your principal residence for every year you owned it, you generally pay no tax on the gain.
One property per family unit each year
For 1982 and later years, only one home can be designated as the family’s principal residence for a given year. For 1993 and later, the family includes you, your spouse or common-law partner, and your children under 18 who do not have a spouse or common-law partner. Owning a house and a cottage means you decide which one to designate for which years, and the choice matters when either property is sold, so it helps to plan it before the first sale.
When you sell one home and buy another in the same year, a special “plus 1” rule lets both properties be treated as eligible for that year. Keep your designation decision in writing for the later sale.
Reporting the sale is required
For 2016 and later years, the CRA allows the exemption only if you report the sale and designation on your return. You complete Schedule 3 and Form T2091(IND). Only page 1 of the form is needed if the property was your principal residence for all the years you owned it, or all years except one.
If you forgot to designate it, ask the CRA to amend the return for the year of sale. A late designation is accepted in certain circumstances, but a penalty may apply.
An illustrative example and where it gets complicated
Suppose you bought a home for $400,000 and sold it for $700,000, paying $20,000 in selling costs. The gain is $280,000. If you designate it for every year you owned it, that gain is exempt, yet you still report it. These numbers are illustrative.
Complications include renting part of the home, a change in use, ownership of two properties, and a flipped property. A housing unit owned for less than 365 consecutive days is generally treated as business income, unless a qualifying life event applies. A loss on your home is not deductible. Bring purchase and sale documents, and records of any rental or business use, to your accountant.
Sources & editorial notes
Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
- Principal residenceCanada Revenue Agency
- Calculating and reporting your capital gains and lossesCanada Revenue Agency
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.