Do I have to pay capital gains tax when I sell my home?
Sell Your Georgetown Home Without Losing Half Your Profit — Do You Owe Capital Gains Tax?
Quick, blunt answer: Most homeowners in Georgetown do NOT pay capital gains tax when they sell their principal residence. But there are important exceptions. Know them now or risk an unpleasant bill from the CRA.
Why this matters in Georgetown, Ontario
The Georgetown housing market has changed fast. Prices are higher than a decade ago. That means more homeowners are worried about whether a gain on sale will be taxed. The law that protects most sellers is the Principal Residence Exemption (PRE). Use it correctly and you pay nothing. Use it incorrectly or miss a step and the CRA will want a piece.
This guide gives clear, local, actionable advice so you can sell with confidence. It’s written for Georgetown homeowners who want real answers, not fluff.
The core rule — Principal Residence Exemption (PRE)
- If the property you sell was your principal residence for every year you owned it, you likely pay no capital gains tax.
- You can only designate one property per family unit (you and your spouse/common-law partner) as your principal residence for a given year.
- The exemption covers the house plus up to 0.5 hectare of land if it’s ordinarily used with the home.
Why this matters: If you lived in the house and it’s your main home, the PRE usually wipes out the taxable gain.
When you WILL owe capital gains tax
You may owe tax if any of these apply:
- The property was rented out for some years — partial exemption only.
- You used part of the house for business (home office claimed as commercial use). That can trigger a deemed disposition.
- You previously designated a different property as the family’s principal residence for the same years.
- The property is income-producing (a multi-unit rental or commercial component).
- You claimed capital cost allowance (CCA) on the property when it was used for rental — you may face recapture.
- The property is newly built and sold by a builder (HST and GST rules apply differently).
In those cases, only the portion that’s taxable gets hit. Capital gains are calculated on the difference between sale proceeds and your adjusted cost base (ACB) minus selling costs.
The math — simple example for Georgetown sellers
- Purchase price (2008): $300,000
- Selling price (2025): $700,000
- Selling costs (legal, realtor): $40,000
- Adjusted cost base (purchase + renovations, receipts): $320,000
Capital gain = Sale price – selling costs – ACB = 700,000 – 40,000 – 320,000 = 340,000
Taxable capital gain = 50% of 340,000 = 170,000
Tax owed = taxable capital gain × marginal tax rate
If PRE applies for every year you owned the property, taxable capital gain = $0.
Rules and reporting you can’t ignore
- Since 2016, you must report the disposition of your principal residence on Schedule 3 of your T1 and complete Form T2091 (or the designated section) to claim the PRE. Not reporting can trigger reassessments.
- Keep receipts: purchase agreement, closing statement, receipts for renovations, property tax records, and records of rental income if applicable.
- If you converted part of the home to rental, consult an accountant — there can be a deemed disposition at the time of conversion.
Local realities that matter for Georgetown homeowners
- Many Georgetown sellers are moving because of job changes or Toronto/Oakville market shifts. If you own multiple properties or have an investment property nearby, designations matter.
- Renovations completed without receipts are hard to claim as ACB. Local contractors in Georgetown provide invoices — keep them.
- Land size matters in Georgetown: if your lot is larger than 0.5 hectare and the extra land isn’t necessary for the residential use, that portion could be taxable.
Practical, step-by-step plan before you list
- Gather documents now: purchase agreement, closing statement, receipts for capital improvements, property tax bills, mortgage history, rental agreements (if any).
- Confirm years of principal residence: list every year you and your spouse lived there as your main home.
- Calculate adjusted cost base (ACB): purchase price + documented capital improvements + eligible costs.
- Check for business or rental use during ownership. If yes, get a tax pro involved early.
- Report the sale on your tax return and file the PRE designation as required.
Do not: remove records, assume the PRE is automatic, or try to split the property informally with family without professional advice.
Tax planning moves that work (legal and practical)
- Time the sale so the property qualifies as your principal residence in the years with the biggest gain.
- Keep detailed receipts for renovations that increase ACB.
- If you rented part of the property, calculate the accurate percentage of time rented vs. personal use — that affects the taxable portion.
- If you converted the property to rental use and back, talk to a tax pro about Section 45? (There are mechanisms but they have strict rules.)
These are planning moves, not loopholes. The CRA watches for aggressive claims. Use professionals.
When to call an accountant — real triggers
- You rented your home for any year.
- You claimed CCA on the property.
- You used part of the home for business.
- You own more than one property and need to designate the best candidate for PRE.
- The gain is large and you want to plan tax timing.
An accountant will run the exact numbers and advise whether structuring or timing can reduce tax legally.
Selling as an estate or inherited property — what Georgetown sellers should know
When a property is inherited, the deemed disposition generally occurs at the date of death. The estate may face capital gains calculated from the deceased’s ACB. Surviving family can often roll the property to a spouse under certain conditions. Always involve a tax lawyer or accountant for estates.
HST — when it matters in residential sales
Most resale homes are exempt from HST. Exceptions:
- New homes sold by builders — HST applies and may change cash flow.
- Commercially used space or self-contained rental suites may trigger GST/HST consequences.
If you’re selling a newly built home in Georgetown or converting to/from rental use, ask a tax professional.
Local negotiation edge — how Tony helps Georgetown sellers
A real estate agent who understands taxes changes the conversation. I refer clients to trusted accountants and prepare the sale so buyers and tax pros can close smoothly. That saves time and reduces surprises at closing and tax time.
Need a quick valuation to see how much potential gain you have? Contact a local realtor who understands the tax angles and the Georgetown market.
Contact: Tony Sousa, Local Realtor and Home-Seller Advisor
Email: tony@sousasells.ca | Phone: 416-477-2620 | https://www.sousasells.ca
Common-sense checklist before you sign the offer
- Do I have records for purchase and improvements? Yes/No
- Did I live in this home every year I owned it? Yes/No
- Did I rent or run a business from the home? Yes/No
- Do I own any other properties that could complicate designation? Yes/No
If any answer is No where you expect Yes, talk to an accountant.
FAQ — Capital gains tax and selling your house in Georgetown
Q: Do I always have to pay capital gains tax when I sell my house?
A: No. If the property was your principal residence for all the years you owned it, the Principal Residence Exemption generally eliminates capital gains tax.
Q: What if I rented my home for a few years?
A: You may owe tax on the portion of the gain attributable to rental years or rented portion. The calculation can be complex — consult an accountant.
Q: How do I report the sale to the CRA?
A: Report the disposition on Schedule 3 of your T1. Complete the section for principal residence designation (T2091 or the appropriate schedule) to claim the PRE. Reporting is mandatory since 2016.
Q: Do renovation costs reduce my taxable gain?
A: Yes. Capital improvements that increase ACB (like additions, new roof, finished basement) reduce the gain if you have receipts. Routine repairs don’t count.
Q: Can I designate more than one property as my principal residence?
A: No. You can designate only one property per family unit for each year.
Q: What about HST — do I have to charge it?
A: Most resale residential sales are exempt from HST. New homes sold by builders are subject to HST.
Q: What if I inherited the property?
A: Capital gains are generally calculated from the deceased’s ACB to the sale price. Estates and rollovers have special rules. Get professional advice.
Q: How does joint ownership affect taxes?
A: Each owner reports their share of the gain. Spouses can coordinate PRE designation, but rules apply.
Q: I claimed CCA in the past when it was rented. Will I have to pay back?
A: You may face recapture of CCA when you sell. That recapture is taxable as income. Talk to an accountant.
Q: Who should I call in Georgetown for help?
A: Call a local realtor who understands tax implications and a qualified accountant. Contact Tony Sousa — he will refer trusted local tax pros and help position your sale.
Final point: Don’t guess. The PRE protects most sellers in Georgetown. But every exception matters. Gather your records, run the numbers, and get professional advice before signing. A few hours of planning can save you thousands.
Contact: Tony Sousa — tony@sousasells.ca | 416-477-2620 | https://www.sousasells.ca
