Posted 10.8.12 @ 10:45
If you’re selling a condo that isn’t your primary home (let’s just say you’re using it like a cottage) and you make a profit, half of the earnings are taxable under CRA’s capital gains tax rules. When it comes to Oakville condos for sale, you’re going to need to know if a property is your primary residence. If it’s not and you sell it, you’re going to have to list this on your taxes. If you’re selling a home that is your primary residence you won’t have to pay taxes. It’s all a little convoluted, but it’s important to figure it out before you file your taxes for the next year.
What is a Primary Residence?
A primary residence is a place that you live in 90% of the time. Even if you’re traveling on business a good chunk of the year, as long as you live “primarily” within this residence, you’ll be good. But if you’re living more than 6 months a year in another home exclusively, it could be considered an income property and you’ll be taxed.
This might seem a little strange, but there’s a good reason for it. We’ve talked a lot about the new mortgage rules that came into effect back in August; many were taking advantage of federal loans to flip Oakville homes for sale (and other places around Canada). When you appeal the CRA’s decision that you sold a secondary residence they’re going to look at whether or not you sold many houses this way. Often, you may be able to “get by” with one house; whatever you do make sure you talk to a licensed tax professional before reporting the sale of a second home as exempt from capital gains.
How You Can Tell if You’ll Need to Pay Capital Gains
Here are some quick guidelines that you can use to figure out if you need to pay capital gains tax after you sell a property. Remember, only 50% of the PROFIT of Oakville homes for sale will be taxed. So if you buy a condo now for $300,000 and you sell it the next year for $350,000, your profit will be $50,000 and you’ll be taxed on the $25,000.
What Kind of Property is it?
How Long Did You Own It? (the longer the better)
Have You Had Many Similar Transactions Like This? (if you’ve been flipping Oakville real estate consistently over the last 2 years and you’ve been saying they’re all your primary residences, this will raise red flags)
How Much Work Did You Put into it? (Oakville homes for sale that have undergone extensive remodelling to make them more attractive and expensive will raise red flags).
Did You Buy This Property in Order to Sell it? (if you bought it to turn a profit, it falls into capital gains territory).
All of these things are good questions to ask yourself and your financial planner and tax accountant/advisor.