Real Estate

Taxes on Selling a Property

  • Last Updated:
  • Jan 21st, 2021 12:45 am
[OP]
Newbie
Jan 16, 2021
2 posts

Taxes on Selling a Property

Hi everyone, I bought a house privately in August for a cost that was less than market value -- the house is located in Scarborough.

I renovated it to some extent, spending upwards of $30k thinking that it would be my permanent residence forever (mind you, I didn't save any of the receipts). Unfortunately, tides have turned and I can no longer afford home expenses, been out of work, and I'm looking to sell it.

I've been offered $150,000 more than what I paid for it; others have expressed interest to pay even more.

Given that it is my permanent residence home, and I've lived in it for 7 months, will I have to pay a capital gains tax on my potential appreciation earnings? I'm unfamiliar with the tax laws, so I don't want to make any errors.

Please help.
9 replies
Member
Mar 14, 2018
212 posts
312 upvotes
Check out Questioin 7, No. 2 in this page:
https://www.moneysense.ca/spend/real-es ... 0residence.

While you should get the principal residence exemption on paper, I think they might find your purchase/sale history as evidence of flipping... If they do audit you, I suppose you could show proof that you are out of work as the evidence for selling the house.
Deal Fanatic
Jul 4, 2004
6122 posts
2202 upvotes
Ottawa
From what I've heard / read, CRA is clamping down on this most as they feel a lot of people are using the principle residence as a tax loophole. The short time frame will likely work against you (if you got it in August, it's barely been 5 months). If they deny the principle residence exemption, then the sale would be subject to capital gains but it would likely be pretty limited since it's based charged on 1/2 of the net profit (although without receipts, they might deny your expenses for the work).
Deal Addict
Feb 19, 2019
1130 posts
1539 upvotes
Stouffville ON
Get advice from a professional accountant, but if this was a one time event and not a repeat, and you can prove to cra the intent and change of circumstances you will likely be fine and will not have to pay capital gains.
If you are in a hot market like GTA you are better off putting it on the open market than doing off market sale.
The cost of reno is not relevant if you sell it as principal residence and not pay capital gains.
Full Time and Full Service Realtor
Newbie
Jan 2, 2021
25 posts
12 upvotes
Just curious, is it not doable for you to rent it out? It seems awfully sad to have to sell after only such a short time there... There may be condo fleeing folks willing to take it from your hands for a year or two while you put your finances back together?
Deal Fanatic
User avatar
Feb 2, 2014
8778 posts
2514 upvotes
Toronto
stylusss wrote: Hi everyone, I bought a house privately in August for a cost that was less than market value -- the house is located in Scarborough.

I renovated it to some extent, spending upwards of $30k thinking that it would be my permanent residence forever (mind you, I didn't save any of the receipts). Unfortunately, tides have turned and I can no longer afford home expenses, been out of work, and I'm looking to sell it.

I've been offered $150,000 more than what I paid for it; others have expressed interest to pay even more.

Given that it is my permanent residence home, and I've lived in it for 7 months, will I have to pay a capital gains tax on my potential appreciation earnings? I'm unfamiliar with the tax laws, so I don't want to make any errors.

Please help.
You lived in the property, wasn't rented out and I am assuming you don't have a history of flipping properties...you're fine.

Feel free to double check with your accountant.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
[OP]
Newbie
Jan 16, 2021
2 posts
I've never flipped a home, this was my primary residence.

I'm plan to sell instead of rent it out because I got my "mortgage" from a private lender, and the interest is quite high. I don't want to live in a situation where I can't pay my creditors. I plan on using my earning to buy a home in Windsor instead.

I will ask my accountant. Any other thoughts are also welcome.
Member
May 28, 2012
425 posts
368 upvotes
ONT
If you used a credit card to buy the renovation stuff print off statement copies now, this might help proving what you spent.
Jr. Member
Apr 6, 2019
175 posts
46 upvotes
GTA
stylusss wrote: I've never flipped a home, this was my primary residence.

I'm plan to sell instead of rent it out because I got my "mortgage" from a private lender, and the interest is quite high. I don't want to live in a situation where I can't pay my creditors. I plan on using my earning to buy a home in Windsor instead.

I will ask my accountant. Any other thoughts are also welcome.
Shouldn't be an issue, if this is your first home and you don't plan to flip sooner again.

Just make sure you don't buy Windsor property via a private mortgage again, otherwise you could end up in similar situation again. Private mortgages are expensive and hard to keep going. Just try to buy within your means.

Top