Most of us know that Canada provides an exemption from taxation for capital gains realized on the sale of a principal residence.  But as simple as this sounds, the rules are quite complex.

Did you know that:

• Since 1981, only one property may be designated as a principal residence in any particular year for you, your spouse, and your minor children?
• You can only use the principal residence exemption to offset capital gains, not income from the sale of a property that was purchased or constructed and held for the purpose of resale?
• You can designate a property as your principal residence even if it is only a seasonal residence or vacation property, and even if it is located outside of Canada?
• You can designate a rental property as your principal residence, subject to certain limitations, if you resided in the property before or after the rental period?

If you have questions about how best to utilize your principal residence exemption, contact a Chartered Accountant.

Information for Tax Tips is provided as a public service by the Chartered Accountants of British Columbia.