New federal rules came into effect January 1, 2023 which now tax the profits from the sale of residential property as business income if the seller owned the property for fewer than 12 months. This means the sale of the property held for less than a year will generally no longer be eligible for either capital gains tax treatment or the principal residence exemption (if owner occupied), and the CRA no longer needs to prove that the seller had the primary intention of acquiring the property to make a profit from flipping the property.
There are a few exceptions for individuals who sell their residential property within 12 months and can provide documentation to support the following major life changes:
- Death of owner
- Involuntary termination of employment
- Breakdown of marriage or common-law partnership
- Insolvency
- Involuntary disposition (e.g. due to natural disaster)
- Addition to household (including birth, adoption or elderly parent moves in)
- Threat to personal safety
- Serious illness or disability
- Work relocation (new home must be at least 40km closer to new work location)
This is another measure added by the federal government designed to reduce speculative demand in the marketplace and help to cool excessive price growth. It may be hard to tell if it actually has any effect. However, it is important information to have for anyone that ends up wanting/needing to sell their home before they have lived in it for a year.
