What is it?
As of January 1st 2023, any profit that is made from the sale of a property which was owned for less than 365 consecutive days will be deemed 100% taxable as business income.
Important information to know:
- If you sell after the 365-day period, the old tax rules apply.
- Assignment sales have not yet been added to the legislation. Once added, in the event of an assignment sale for preconstruction, the 12-month holding period would reset once ownership of the property is transferred.
- Builders Excise Tax Act that charges the GST/HST on a sale is still applicable.
Key Points
- The tax applies to a principal residence as well as an investment property.
- The profit will be reported as 100% of business income on the income tax return.
- Individuals will not be eligible to report business losses or non-capital losses.
- If you own the property in your personal name, the profit you make can be subject to a marginal tax rate. If the property is held in a corporation’s name, the profit is taxed as active business income.
- If not reported, a gross negligence penalty of 50% of additional taxes owing and interest charges may apply.
- Exemptions:
- Death of the taxpayer or a related person
- A related person joining the household (birth, adoption, or care of elderly parent) or the taxpayer is joining a related person’s household
- Breakdown of marriage or partnership (if living apart for at least 90 days prior to the disposition)
- Threat to personal safety
- Disability or serious illness
- Eligible work relocation
- Involuntary termination of employment
- Insolvency
- Destruction or expropriation of the property
