Personal Finance

Cap Gain Tax Question - Primary Residence -> Investment Property

  • Last Updated:
  • Nov 28th, 2020 2:01 pm
[OP]
Newbie
Nov 16, 2011
18 posts
4 upvotes
TORONTO

Cap Gain Tax Question - Primary Residence -> Investment Property

Let's say someone bought a home for $500k and lived in it as their primary residence. Years later it's worth $1M.

They buy a new home but want to keep their old home and turn it into an investment property.

If they were to do this and later sell the home, would the full $500k be a taxable gain? Or only any appreciation above $1M - at the point where it stopped being their principal residence (with an appraisal done to confirm the value at this point in time)?
3 replies
Deal Addict
Jan 19, 2017
4798 posts
2781 upvotes
michsnedd wrote: Let's say someone bought a home for $500k and lived in it as their primary residence. Years later it's worth $1M.

They buy a new home but want to keep their old home and turn it into an investment property.

If they were to do this and later sell the home, would the full $500k be a taxable gain? Or only any appreciation above $1M - at the point where it stopped being their principal residence (with an appraisal done to confirm the value at this point in time)?
From the conversion on. I.e. any increase after $1M.
Deal Addict
Jan 15, 2017
4114 posts
3619 upvotes
Capital gains is calculated at the point the home is converted from a principal residence to a rental property. When you decide to rent it out, the best advice is to have the home professionally appraised by an accredited appraiser and save that appraisal for later when you decide to sell the home.
Banned
Oct 17, 2020
217 posts
145 upvotes
You put the first house in your kids name so they can claim principal residence.

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