Real Estate

capital gain on selling of short term rental property?

  • Last Updated:
  • Feb 23rd, 2018 3:57 pm
[OP]
Member
Jul 11, 2007
473 posts
107 upvotes
GTA

capital gain on selling of short term rental property?

its tax season and I am searching for some answer.. we own our principle resident for 10 years, and moved out to a rental house during reno last year, (during reno the Ontario foreign tax took effect) .. kids like school and all the conveniences of new places, so we decided to stay in the rental, and rent out our principle resident after reno done. just after few month into a landlordhood, we now realizing really don't have time to deal with family, kids, career and tenants at the same time, we are now thinking of selling property (juut thinking..)... what is the best way to avoid capital gain tax?

I saw CRA rule that allow us to rent out principle resident and continue to make the property as designated principle resident. is there other way?
CRA link

or find way to calculate the capital gain during the rental period ? someone told me to get a appraisal of property; but we don't know if there is CRA's approved assessor ? and it's properly too late anyway, since we rent it out last year?

any suggestion or discussion is appreciated!
7 replies
Deal Fanatic
Mar 15, 2005
5491 posts
1035 upvotes
You cannot just avoid the capital gains tax on the sale, the good news is you would only pay gains on the difference in price from when you vacated it until now, which in this down market shouldn't be much, if anything at all.
[OP]
Member
Jul 11, 2007
473 posts
107 upvotes
GTA
thanks, but to make a gain or loss, there would be an assessment, who is qualify to provide such services? property tax assessment or real estate agent?

also according to the CRA, one can avoid it, quote from CRA

"When you change your principal residence to an income producing use such as a rental or business property, you can make an election not to be considered as having started to use your principal residence as a rental or business property. This means, if you make this election, you do not have to report any capital gain when you change its use. However:

you have to report the net rental or business income you earn; and
you cannot claim capital cost allowance (CCA) on the property.
Deal Addict
User avatar
Dec 13, 2016
3757 posts
3257 upvotes
gogozy wrote: thanks, but to make a gain or loss, there would be an assessment, who is qualify to provide such services? property tax assessment or real estate agent?

also according to the CRA, one can avoid it, quote from CRA

"When you change your principal residence to an income producing use such as a rental or business property, you can make an election not to be considered as having started to use your principal residence as a rental or business property. This means, if you make this election, you do not have to report any capital gain when you change its use. However:

you have to report the net rental or business income you earn; and
you cannot claim capital cost allowance (CCA) on the property.
I made an election and in no way does that release me from paying capital gains. The election is made if you move back to your property and make it a primary residence again. If you sell it, you still pay taxes.
Deal Fanatic
Jul 3, 2011
5913 posts
3062 upvotes
Thornhill
You should be fine with the primary residence election rules.

Even if you're denied the exemption it seems highly unlikely that the one year differential after capital costs for last year's renos and selling costs will put you in capital gain position.

A tax accountant can settle that question for you and well worth the couple hundred dollars for such piece of mind.
[OP]
Member
Jul 11, 2007
473 posts
107 upvotes
GTA
licenced wrote: You should be fine with the primary residence election rules.

Even if you're denied the exemption it seems highly unlikely that the one year differential after capital costs for last year's renos and selling costs will put you in capital gain position.

A tax accountant can settle that question for you and well worth the couple hundred dollars for such piece of mind.
thanks,
definitely will going to tax accountant!!
[OP]
Member
Jul 11, 2007
473 posts
107 upvotes
GTA
BiegeToyota wrote: I made an election and in no way does that release me from paying capital gains. The election is made if you move back to your property and make it a primary residence again. If you sell it, you still pay taxes.
were primary resident exempted from paying capital gain tax? or you mean if I would be subject to capital gain if I sell it without moving back? (but I thought the election is to make the property looks like my primary resident even if i Do not live there?)
Deal Fanatic
Mar 15, 2005
5491 posts
1035 upvotes
gogozy wrote: were primary resident exempted from paying capital gain tax? or you mean if I would be subject to capital gain if I sell it without moving back? (but I thought the election is to make the property looks like my primary resident even if i Do not live there?)
You pay capital gains on the increase in value while you were not living there.

For example you buy a house for 400K and start renting it out a few years later. At this point in time you should assess the fair market value of the home, lets say $600K. If in a few years you decide to sell the home you would pay capital gains on the difference between the sale price and the $600K valuation when the home became in income property.

Top