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Selling your home usually triggers no capital gains tax in Canada, but only if the home was your principal residence in each year you owned it and you report the sale on your tax return. Skip the reporting and the CRA can deny the exemption. On a $360,000 gain, that mistake would cost an Ontario taxpayer with $90,000 of other income about $81,000.
When the capital gains tax on selling your home is zero
The principal residence exemption wipes out the gain, and it isn’t automatic. Your home has to meet four conditions. It must be a housing unit (a house, condo, cottage, duplex, mobile home or houseboat all count), you own it alone or with someone, you or your spouse, partner or child lived in it during the year, and you designate it.
Only one home per family unit can be designated for any given year. That means you, your spouse or common-law partner and your dependent children share a single designation. Own a house and a cottage? You can’t name both for the same year.
You must report the sale, even when you owe nothing
Since the 2016 tax year, the CRA grants the exemption only when the sale and the designation appear on your return. The paperwork is Schedule 3 plus form T2091(IND). If the home was your principal residence for all the years you owned it, or all but one, you complete page 1 of T2091 only.
Missed it last year? Request an amendment to the return for the sale year, and don’t wait. Without the designation there’s no exemption.
How the gain is worked out if some of it is taxable
The formula is short. Sale price, minus what you paid plus the costs of buying and improving, minus selling costs, leaves the gain. Half of it lands in your income and is taxed with everything else. The 50% inclusion rate is the long standing figure and we couldn’t find a CRA page that states a separate 2026 rate, so check the capital gains page before you file. The rise to two thirds that was once proposed was cancelled in March 2025.
| Step | Example amount |
|---|---|
| Sale price | $900,000 |
| Cost base (price, buying costs, improvements) | $500,000 |
| Selling costs | $40,000 |
| Gain | $360,000 |
| Half added to income | $180,000 |
| Extra tax, Ontario, $90,000 other income | about $81,000 |
Those tax figures come from our capital gains tax calculator. They show the cost of losing the exemption, not what most sellers pay. A seller who designates the home for every year owes nothing on the $360,000.
Cases where the exemption gets complicated
A few situations catch people out.
Renting out part of the home, or turning it fully into a rental, changes the picture. Changes of use have their own CRA page. One election, under subsection 45(2), can put off the gain when a home becomes a rental, but then depreciation is off the table.
Land is another one. The land that counts toward a principal residence is usually limited to half a hectare, about 1.24 acres, unless municipal rules or how you actually use the lot justify more.
Took depreciation on a home office? Then part of the gain may be taxable. Our guide to the self-employed home office claim explains why most people skip it.
What you actually take home
Tax isn’t the only hit. Realtor fees, legal costs and moving all come off the price. The home sale proceeds calculator shows what’s left after the mortgage and fees, and the realtor commission calculator lets you test different rates. Commission levels vary by agreement, so we don’t quote a typical one.
Where the numbers come from
The rules on designation, reporting, land size and the 50% inclusion are taken from the Canada Revenue Agency’s principal residence and capital gains pages. Tax amounts come from our engine using 2026 federal and Ontario data, and the $900,000 sale is an example.
Frequently asked questions
Do I pay capital gains tax when I sell my house in Canada?
Not if it was your principal residence for each year you owned it and you report and designate it on your return.
Do I have to report the sale if there is no tax?
Yes. For sales since 2016 the sale goes on Schedule 3 with form T2091(IND), or the exemption is refused.
Can I have two principal residences?
Not for the same year. One home per family unit can be designated for any year.
What if I forgot to report the sale last year?
Request an amendment for the sale year as soon as you notice.
How much land counts with my home?
Usually up to half a hectare (1.24 acres), more if municipal rules or how you use the land justify it.
- 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.