Canada Capital Gains Tax Changes: What You Need to Know

As a homeowner, the Canadian government's recent capital gains tax changes might have you wondering what this means for you. Whether you're planning to sell your home or just want to stay informed, this guide will provide you with everything you need to know about these new tax laws.

What's Changing?

The most significant change is the elimination of the principal residence exemption for non-residents. This means that if you're not a Canadian resident and sell your home in Canada, you will be subject to capital gains tax on any profits you make. The capital gain is calculated as the difference between the sale price of the property and its adjusted cost base (which is generally the purchase price plus certain allowable expenses).

Who is Affected?

The new rules apply to non-residents who sell their Canadian homes on or after January 1, 2017. This includes individuals who are not citizens or permanent residents of Canada, as well as foreign corporations.

How Much Tax Will I Pay?

The capital gains tax rate for non-residents is 25%. This means that you will pay 25% of your capital gain in taxes. However, there are some exceptions to this rule. For example, if you have lived in your home for at least two years, you may be eligible for a reduced tax rate of 50%.

What Can I Do to Minimize My Tax Bill?

There are a few things you can do to minimize your capital gains tax bill. These include:

Living in your home for at least two years. This will qualify you for a reduced tax rate of 50%.
Making improvements to your home. This can increase your adjusted cost base, which will reduce your capital gain.
Selling your home for less than its fair market value. This will reduce your capital gain, but it may also affect your ability to get a good price for your home.

What if I Have Already Sold My Home?

If you have already sold your home and are subject to capital gains tax, you should file a tax return with the Canada Revenue Agency (CRA). You can do this online or by mail. The deadline for filing your tax return is April 30th of the year following the year in which you sold your home.

The bottom line is, if you're a non-resident selling your home in Canada, it's important to be aware of the new capital gains tax rules. By understanding your tax obligations, you can take steps to minimize your tax bill and avoid any surprises.