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Capital gains on the sale of property are taxed on only part of the profit. If the home was your principal residence for every year you owned it, the gain is exempt, though you must still report the sale. The tax bites on a second property, say a cottage or a rental.
Is the profit from selling my house taxable?
That depends on the property. Your main home can qualify for the principal residence exemption. To qualify it must be a housing unit you own, where you, a spouse, a partner or a child lived at some time in the year, and that you designate as your principal residence. A house, condo, cottage or mobile home can all count.
For any given year you can designate one home per family. The CRA counts the family as you, your spouse or partner and your unmarried children under 18. That’s why a couple with a house and a cottage can’t shelter both for the same years. Say Ana and Luc in Kelowna own a house and a lake cottage. For each year they pick one, and the other builds up a taxable gain for those years.
How are capital gains on the sale of property worked out?
Start with the sale price. Subtract what you paid, plus eligible costs that raise the base, and then your selling costs. Usually half of what’s left lands on your income for that year and gets taxed like pay. The calculator uses 50% because the 2026 figure isn’t stated on the CRA pages that were read. The proposed rise to two-thirds was cancelled in a government release of 21 March 2025.
The tax depends on your other income, because the taxable half stacks on top of it. Here’s what the capital gains tax calculator gives for a second property sold for $900,000, bought for $600,000, with $45,000 in selling costs and $90,000 of other taxable income.
| Item | Ontario | Quebec |
|---|---|---|
| Gain | $255,000 | $255,000 |
| Half added to income | $127,500 | $127,500 |
| Extra tax | $54,515 | $58,332 |
| Share of the gain | 21.4% | 22.9% |
Roughly a fifth of the profit goes to tax in both places. The gap between the provinces is about $3,800.
Do I have to report a sale that’s fully exempt?
Yes. The CRA’s principal residence page says to report the sale on Schedule 3 and on Form T2091(IND), and it only allows the exemption if you report both the sale and the designation. A late designation may mean penalties.
Easy to forget.
You think “it’s my home, so there’s no tax,” and the form never crosses your mind. It takes a few minutes. Skipping it can cost you the exemption or bring a penalty, which is a poor trade. If you realize after filing that you forgot, ask the CRA to amend the return rather than hoping nobody notices.
What if I only lived there part of the time?
The exemption covers the years you designate the home, with a bonus year added by what the CRA calls the “plus 1” rule, so selling one home and buying another in the same year doesn’t leave you exposed. If part of the home earned rental or business income, you split the sale price and cost by area or rooms, and only the income-producing share has a taxable gain.
Wondering about a rental? The rental property calculator runs the yearly numbers, and the gain on sale is a separate calculation.
Mistakes that turn a gain into something worse
Selling within 365 days is the big one. The CRA says a property held less than 365 consecutive days is taxed as business income, not as a capital gain, unless the sale follows a listed life event: a death, a move for work, an illness or a safety threat. Business income is fully taxable, so the half-gain break is gone. Picture someone who buys a condo in March and sells it in the new year because the market jumped. Day 300 is not day 365, and the whole profit is income.
Others: forgetting selling costs that reduce the gain, and mixing up what’s left after tax with what’s left after the mortgage is paid. For the cash you end up with, the home sale proceeds calculator starts from commission, legal fees and payoff. And to see how the extra income moves your bracket, try the marginal tax rate calculator.
What should you keep from the sale?
Hang on to the purchase and sale statements, the lawyer’s closing documents, receipts for big renovations, and the agent’s commission invoice. The CRA can ask for them years later, and the cost base is built from exactly those papers. A folder per property, in a drawer or on your computer, is plenty.
Where the numbers come from
The exemption, reporting and flipping rules are the Canada Revenue Agency‘s, taken from its principal residence and capital gains pages. The examples come from our calculator using 2026 provincial and federal rates, with the taxable share set at 50%. The calculator applies the lifetime exemption for qualifying small business and farm property only if you switch it on.
Frequently asked questions
Do I pay capital gains tax when I sell my house?
Not if it was your principal residence for every year you owned it and you designate it. A second property, such as a cottage or rental, can be taxable.
Do I have to report the sale of my main home?
Yes. The sale goes on Schedule 3 and Form T2091(IND). The CRA only allows the exemption if you report the sale.
How much of the gain is taxed?
Half is added to your income in the calculator. The 2026 figure isn't stated on the CRA pages we read, and the planned rise to two-thirds was cancelled.
What if I sell within a year of buying?
A property held less than 365 consecutive days is taxed as business income, with limited exceptions for certain life events.
Can a family claim two homes?
Only one home per family can be designated for any year. Family means you, your spouse or partner and your unmarried children under 18.
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