SIMPLIFIED SUMMARY:
If you have sold any home or property since January 1, 2016 it must be reported on your personal tax return. If it's your principal residence for all the years you owned it - it should be tax free. However, if it's your principal residence AND YOU DON'T REPORT IT - it could cost you up to $8,000 in penalties, PLUS capital gains taxes on the sale!!!
More Detailed Summary:
Did you SELL your home (or plan to)?
The tax laws for principal residence exemptions changed in 2016! Ignoring these changes could
cost YOU up to $8,000 in penalties and thousands in extra taxes!
Brief History:
-In the past, the sale of your principal residence (your personal home) was typically fully exempt from income tax and therefore was not required to be reported on your personal tax return.
What has Changed?
Now ALL property sales need to be reported on your tax return in the year the property is sold. If the property was your principal residence for all the years you owned it, the sale proceeds may still be TAX FREE.
How does this affect me?
If you have sold a home or property anytime after January 1, 2016 you are now required to properly report the sale on your income tax return even if the proceeds are not taxable.
- You will need to report:
- Date of acquisition (the date you bought the home)
- Proceeds of disposal (how much you sold it for)
- And a description of the property.
What qualifies as a home or property that needs to be reported?
A home or property includes a; house, cottage, condominium, apartment, trailer, mobile home, or house boat.
What happens if I ignore it?
The government has passed a special provision that allows the Canada Revenue Agency (CRA) to go back beyond the normal 3 year period, to re-assess tax payers who failed to report property dispositions.
According to the CRA, taxpayers who do not report the sale of their principal residence on their tax returns may be penalized and not allowed this special tax-free provision resulting in the taxpayer being required to pay capital gains tax on the sale of the property.
However, if you properly report the sale of your home you may be able to avoid these penalties and keep all the proceeds TAX FREE!
CRA has recently launched a nation-wide task force and given them $10 million to audit and pursue house sales since Jan 1, 2016. If they haven't identified your house sale yet, make sure to get it reported to them before they identify it and charge you large penalties and taxes.
NOTE: These rules ALSO apply to those who change the use of a property (from a Principal Residence to a Rental or Business, or vice versa).
A tax professional at TaxTeam can discuss this and other credits and deductions that may affect your taxes. Call 306-694-4829 or visit www.taxteam.ca
