Canada home sale tax
Principal residence exemption, when it was not every year.
Enter the gain, the years you owned the home and the years you designate it. See the exempt share and the gain that is still taxable.
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Result
Method and sources
Formula (CRA Income Tax Folio S1-F3-C2, paragraph 2.20): exempt gain = gain x (B / C). B is 1 plus the number of tax years ending after you acquired the property for which it was your principal residence; the 1 applies only if you were resident in Canada in the year you acquired it. C is the number of tax years ending after the acquisition date during which you owned the property. The exempt share cannot exceed 100%.
Reporting: the CRA says a sale of a property that was ever your principal residence is reported on Schedule 3, Capital Gains or Losses, with Form T2091(IND) to designate the property. It also describes a "plus 1" rule for the year you sell one home and buy another.
Not modelled: a change in use, trusts, the land limit of half a hectare, the residential property flipping rule. Enter the gain you would report on Schedule 3.
Sources, retrieved 2026-10-18:
- Canada Revenue Agency, Income Tax Folio S1-F3-C2, Principal Residence
- Canada Revenue Agency, Principal residence and other real estate
A planning estimate, not tax advice.
FAQ
What is the principal residence exemption formula?
Per CRA Income Tax Folio S1-F3-C2, the exempt part of the gain is the gain multiplied by B divided by C, where B is 1 plus the years the home was your principal residence and C is the years you owned it.
Why is there a plus 1?
It lets you treat both homes as a principal residence in a year you sell one and buy another. Since October 3, 2016 the folio says it applies only if you were resident in Canada in the year you acquired the property.
Do I have to report a sale if the whole gain is exempt?
The CRA says that for a sale of a property that was ever your principal residence you report it on Schedule 3 and file Form T2091(IND) to designate it.
What if the home was a rental for some years?
Only years you designate count in B. Years you do not designate reduce the exempt share, so part of the gain is taxable. Special change-in-use elections are not modelled here.