Updated Checked by the Tax-Services.ca editorial team How we check
Capital gains tax in Canada on real estate depends on one question: was the property your principal residence every year you owned it? If yes, the CRA says you don’t pay tax on the gain. If it was a rental, a cottage or a second property, the profit is a capital gain, and our calculator counts half of it as taxable income.
When capital gains tax applies to real estate
Start with the sale price. Take off what you paid (the adjusted cost base) and what it cost to sell. What’s left is the gain. Nothing is taxed until you sell or are treated as having sold. That taxable half lands on top of everything else you earned that year, so a big salary means a bigger bill.
About that half. The plan to raise the inclusion rate to two-thirds was cancelled in the Prime Minister’s release of 21 March 2025, so the old half still applies as far as we can tell. We couldn’t find the 2026 rate stated on a CRA page, so confirm it there before you file.
| Type of property | Usual treatment |
|---|---|
| Home that was your principal residence every year | No tax on the gain, but the sale must be reported |
| Rental property | Gain reported on Schedule 3 |
| Home partly rented or used for business | Price and cost split between the parts |
| Home that was a residence only some years | Gain for the other years is reported |
A rental sale, with real numbers
Suppose you sell a rental condo in Ontario for $250,000. You paid $150,000 and spent $5,000 on agent fees and legal costs. Your gain is $95,000, and $47,500 of it is taxable. With $90,000 of other income, our capital gains tax calculator shows about $17,451 in tax, roughly 18.4% of the gain. You keep around $77,549 of it.
Run the same sale with $60,000 of other income and the tax falls to about $14,416. Same gain, different year. That’s the quiet lever in real estate: when you sell matters as much as what you sell for. To see where your next dollar lands, try the marginal tax rate calculator.
These figures cover the tax on the gain only. A sale also brings agent commission and possibly a mortgage penalty, which the home sale proceeds calculator adds up to show what lands in your account.
Does selling my house trigger the principal residence exemption?
It does, and you have to claim it. The CRA has required this since the 2016 tax year: no reporting and designation on your return, no exemption. You file Schedule 3 and Form T2091(IND) with the return for the year of the sale.
No tax is due, so people skip it. That’s a mistake. Forgot? The CRA says to ask it to amend that year’s return. A late designation is accepted in some cases, and a penalty may apply. We couldn’t confirm the penalty amount, so we won’t guess at it.
Partly rented homes and other tricky cases
If you rented out part of your home, or used part of it for a business, you split the selling price and the cost between the personal part and the income part. Only the gain on the income part is reported on line 13800 of Schedule 3, according to the CRA page.
A cottage is the usual surprise. When you own a house and a cottage, which one you name as the principal residence for each year changes the tax. We haven’t modelled that choice, because it depends on dates and on how many years you hold each. An accountant earns their fee here, since a wrong designation is hard to undo.
And what about a property you flip? Buying and quickly selling for profit can be treated as business income rather than a capital gain, in which case the full profit is taxed. We couldn’t confirm a test or a holding period from an official page, so we won’t quote one.
Mistakes and limits of this estimate
The calculator is federal and provincial income tax on an estimate. It doesn’t model what you paid in land transfer tax when you bought, and we couldn’t confirm from an official page whether it adds to your cost, so check the CRA. It also ignores lifetime events such as a capital loss carried forward, or a reserve if you are paid over several years.
Purchase costs matter here too. If you kept no records, the closing costs calculator gives a rough idea of what you spent. Keep the legal statement from the day you bought. It saves a lot of arguing later.
Where the numbers come from
Exemption and reporting rules come from the Canada Revenue Agency’s pages on capital gains and the principal residence exemption, which describe the forms for 2025 sales. The two-thirds cancellation is from the Prime Minister’s release of 21 March 2025. The example uses the tax rates in our income engine for 2026 and a 50% inclusion rate, which we have not seen confirmed for 2026 on a CRA page. We have no link with the CRA.
Frequently asked questions
Do I pay capital gains tax when I sell my house in Canada?
Not if the property was your principal residence for every year you owned it, according to the CRA. You still have to report the sale and the designation.
What forms do I file when I sell a home?
Schedule 3 and Form T2091(IND) for the year of the sale, based on the CRA's page for 2025 sales.
How much of the gain is taxable?
Our calculator counts 50%. The plan for two-thirds was cancelled on 21 March 2025, but we could not find the 2026 rate on a CRA page, so confirm it.
What if I rented part of my home?
You split the price and cost between the personal and rental parts. Only the gain on the income part is reported, on line 13800 of Schedule 3.
What if I forgot to claim the exemption?
Ask the CRA to amend the return for the year of the sale. A late designation may be accepted, but a penalty may apply.
All property and estate tax calculators
- Property and tax in Canada: buying, owning and selling
How property tax and transfer tax apply when you buy, own, rent out or sell a home in Canada, with the calculators for each step
Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.