What deductions can I claim when selling a home?
Want to keep thousands when you sell your Milton home? Read this first.
Why this matters
Selling a home in Milton is more than staging and negotiating. Taxes and deductions decide whether you walk away with most of the equity — or leave a chunk on the table. This guide gives Milton, Ontario homeowners the exact deductions they can claim, how Canadian tax rules apply, and the local considerations you must know.
Quick summary
- If your house was your principal residence for every year you owned it, most capital gains are sheltered by the principal residence exemption — but you must report the sale on your tax return to claim it.
- For homes used as rentals, short-term rentals (Airbnb), or home offices, expect taxable capital gains on the used portion; selling expenses and capital improvements reduce taxable gain.
- Common deductible selling costs: real estate commissions, legal fees, advertising fees, and documented selling-related repairs and staging.
- Non-resident sellers face withholding rules and must get a CRA clearance certificate to avoid large holdbacks.
What Canadian and Ontario rules mean for Milton sellers
- Capital gains inclusion rate: Canada taxes 50% of any capital gain. That means half the gain is included in taxable income unless you claim the principal residence exemption.
- Principal residence exemption: If the property was your principal residence every year, you can usually avoid capital gains tax. Since 2016, CRA requires you to report the sale on your tax return to claim the exemption.
- HST: Resale homes are normally exempt from HST. HST applies primarily to new builds or substantial renovations sold by builders.
- Non-resident vendor rules: If you are not a Canadian resident at the time of sale, the buyer may have to withhold funds under CRA s.116 unless you secure a clearance certificate.
Exact deductions Milton homeowners can claim when selling a home
1) Real estate commissions and agent fees
- What counts: Commissions paid to listing and selling agents, flat fees to brokerages, buyer rebate fees paid from proceeds.
- Milton note: With local commissions commonly between 3%–5%, this is the single biggest deductible selling expense. Keep your listing agreement and paid invoices.
2) Legal fees related to the sale
- What counts: Legal fees for closing, title transfers, preparing statements, and discharging mortgages.
- What doesn’t: General legal advice unrelated to the sale.
3) Selling-related repairs and renovations (careful split: capital vs current)
- Deductible immediately: Minor repairs made to facilitate the sale (painting to make the home marketable, replacing broken fixtures) typically reduce proceeds and are treated as selling expenses.
- Capital improvements: Larger renovations that add lasting value (room additions, new roof, kitchen overhaul) are not immediately deductible but increase your adjusted cost base (ACB), reducing taxable capital gain when you sell. Keep receipts and contractor invoices.
4) Staging, photography, and marketing costs
- What counts: Professional staging fees, listing photography, floor plans, virtual tours, online ad spend if directly tied to selling this property.
5) Advertising and open-house expenses
- What counts: Classifieds, paid online listings, flyers, signage, and permit fees for signs.
6) Mortgage discharge penalties and interest
- Personal principal residence: Penalties for breaking a mortgage are generally not deductible for income tax purposes. They do not directly reduce capital gains on a principal residence.
- Rental/investment property: Mortgage penalties and interest related to generating rental income are typically deductible against income. Consult a tax pro.
7) Accounting and tax advice tied to the sale
- What counts: Fees for preparing the tax return elements directly tied to the sale, capital gains calculations, or getting a CRA clearance certificate for non-resident transactions.
8) Costs to comply with government rules (non-resident clearance certificates)
- If you’re a non-resident seller, fees paid to obtain a clearance certificate from CRA and any associated accounting/legal fees are deductible against proceeds or treated as selling costs.
9) Pro-rating expenses and mixed-use deductions (home office, rental periods)
- If part of the home was used for business or rented out, you must calculate the percentage of the property attributable to business/rental use. Only that portion loses principal residence status and becomes subject to capital gains. Keep square footage records, utility allocation, and the years the space was used for business or income.
How selling costs affect capital gains math (simple example)
- Start: Sale price
- Subtract: Selling costs (commissions, legal fees, staging) = Net proceeds
- Subtract: Adjusted cost base (original purchase price + capital improvements + eligible costs) = Capital gain
- Taxable portion: 50% of capital gain included in taxable income unless principal residence exemption applies
Practical Milton steps to maximize deductions
1) Keep every receipt. Digitize invoices for commissions, contractors, staging, photography, advertising, and legal fees.
2) Separate capital improvements from cosmetic fixes. Label invoices clearly and store permits where applicable.
3) Track any rental or business use of the property by year and area. If you ran Airbnb, keep calendars and income records.
4) Report the sale on your T1 (or the appropriate CRA forms) to claim the principal residence exemption. Reporting is mandatory to secure the exemption.
5) If you’re non-resident at sale, arrange for a CRA clearance certificate before closing to avoid statutory withholding.
6) Consult an accountant familiar with Milton/Halton tax realities if you have mixed use, rental history, or large capital improvements.
Local market considerations for Milton sellers
- Milton remains a high-demand commuter town in Halton Region. Strong demand traditionally supports quick sales and competitive offers. That affects timing and which expenses make sense (e.g., less need for deep discounts but still invest in minimal staging and high-quality photos).
- Inventory and pricing influence how much you need to spend on marketing and staging. If the market is fast, focus on high-impact, low-cost fixes and professional photos.
- Local broker commissions and legal fees can vary. Shop smart but prioritize proven agents who get top net proceeds. Paying slightly higher commission to a top-performing Milton agent can net you a larger sale price that easily covers that fee.
Common mistakes that cost money
- Not reporting the sale and losing the principal residence exemption.
- Throwing away receipts for repairs, contractors, staging, or marketing.
- Treating capital improvements as immediate deductions instead of ACB adjustments.
- Ignoring business or rental use of the property and then being surprised by taxable gains.
- Non-resident sellers failing to get a clearance certificate and having a buyer withhold large sums at closing.
Quick checklist before closing
- Confirm whether the sale qualifies for principal residence exemption; decide whether a designation will be needed.
- Collect and organize invoices for commissions, legal fees, staging, repairs, and capital improvements.
- If part-rental/part-home office, calculate the percentage used for income-producing activities by year.
- If non-resident, apply for a CRA clearance certificate early.
- Talk to a CPA about timing — sometimes moving closing dates, or matching costs to fiscal year, can change tax outcomes.
FAQ — Milton sellers and tax deductions
Q: Do I have to pay capital gains tax if I lived in the house my whole ownership?
A: Usually no. If the property was your principal residence for every year you owned it, the principal residence exemption typically removes taxable capital gain. You must report the sale on your tax return to claim the exemption.
Q: Can I deduct real estate commission and legal fees?
A: Yes. Commissions and legal fees directly tied to selling the property reduce the proceeds and lower any capital gain.
Q: Are renovation costs deductible?
A: Minor selling repairs reduce proceeds; major renovations are capital improvements that increase your adjusted cost base and reduce capital gains at sale. Keep invoices.
Q: I rented my Milton home for a few years. What happens?
A: You will likely have a mixed-use calculation. The years and portion of the home used to earn rental income can be taxable. You must calculate the proportion of the gain attributable to rental use and report it. Consult a tax professional.
Q: I’m not a Canadian resident — will the buyer withhold money?
A: Possibly. Under CRA rules, buyers may have to hold back funds unless the seller provides a clearance certificate. Start the clearance process early.
Q: Do I need to collect every small receipt?
A: Yes. Even small receipts for staging, advertising, or repairs build your record and reduce taxable gain or prove selling costs.
Q: Does HST apply to my resale home in Milton?
A: Most resale homes are exempt from HST. HST typically applies to new builds or substantially renovated properties sold by builders.
Final words — plan, document, and act
Selling a home in Milton is a major financial event. Taxes and deductions can change your net proceeds by thousands. The rules are straightforward: report the sale, document every selling-related expense, treat capital improvements as ACB increases, and get professional help if your situation involves rentals, business use, or non-residency.
For a clear, local plan that maximizes your net proceeds and keeps CRA issues out of closing, contact Tony Sousa — local Milton realtor who understands the market and the paperwork. Email: tony@sousasells.ca | Phone: 416-477-2620 | Website: https://www.sousasells.ca
This post is a practical overview. Tax rules evolve. Always confirm with CRA guidance or your accountant for your specific situation.
