Who this is for
Anyone who sold a home in BC this year or plans to. Especially owners who rented out a suite, ran a business from home, owned a second property, or moved more than once.
The five things
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Report the sale. The sale goes on Schedule 3 of your return, with the year of purchase, the proceeds and a description of the property. The principal residence designation goes on Form T2091. This applies even when the whole gain is exempt.
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Designate the right years. You can designate one property per year as your principal residence, and a plus-one rule covers the year you move from one home to another. If you owned a cottage or a second home in the same years, the designation is a choice, and it should be made deliberately.
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Account for rented or business use. A basement suite rented for years, or a home office, can make part of the gain taxable, especially if depreciation was claimed on that part. The CRA treats a small, ancillary use with no structural change and no depreciation claimed as not changing the home’s status. A separate suite with depreciation claimed is different.
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Keep the records. The purchase contract and statement of adjustments, receipts for improvements, and the sale documents. Improvements raise the cost and reduce any taxable gain. Keep them until six years after the year of sale.
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Know when the exemption does not cover everything. Years you did not live there. Years another property was designated. A home bought and sold quickly that the CRA treats as business income. A property that was never your residence. Each needs a calculation, not an assumption.
One thing many people do not realize
Since 2016 the CRA only allows the principal residence exemption if the sale and the designation are reported on your return. A tax-free sale that is not reported can lose its tax-free status. The CRA can accept a late designation, but a penalty may apply. The report is not optional paperwork; it is the exemption.
What to prepare
- Purchase documents with the date and price
- Receipts for major improvements
- Sale documents with the date, price and selling costs
- Dates of any rental or business use, and whether depreciation was claimed
- Details of any other property you owned during the same years
When professional help may make sense
Any rental or business use, more than one property, a sale within a year or two of purchase, or a sale by an estate. Each changes the calculation.
How Rex Tax may be able to help
We report the sale, prepare the designation, and work out any taxable portion. Our guides on basement suite records and basement suite mistakes cover the rental side before the sale.
Official sources
This guide is general information, not advice about your situation. It reflects the rules for the 2025 and 2026 tax years. It has not yet been reviewed by a practitioner. The information was checked against the official sources listed above on the date shown. Rules change. Check the official sources above or ask us. How we prepare these guides.