Canada: Personal Taxation
This page was last updated on 6 June 2019.
Provinces and territories apply their own local taxes on real estate, usually based on the value of the property and its use.
Where a homebuyer’s plan is used to help buy or build a home, a maximum of C$25,000 can be borrowed from the individual’s registered retirement savings plan; no income tax is charged on the amount borrowed. The purchase or building of a new home - or substantial renovation of an existing home - may qualify for a rebate of a portion of the goods and services tax (GST) or harmonised sales tax (HST) paid on the purchase or renovations. Furthermore, the purchase or building of a new residential property that is to be used as rental accommodation may also qualify for a GST or HST rebate.
The first-time home buyer’s tax credit can be claimed by eligible individuals – the credit is calculated using the lowest income tax rate (15% for 2019) multiplied by C$5,000. Thus, for 2019, the credit is C$750.
Where real estate has been purchased with the sole aim of reselling at a profit (or developing the real estate in a manner that can be deemed a business pursuit) the usual capital gains tax rules do not apply. Hence the whole gain rather than 50% becomes subject to income tax.
The sale of an individual’s principal residence is generally exempt from capital gains tax. Land attached to the principal residence in excess of half a hectare is not included in the exemption, and is therefore charged to capital gains tax.
For 2019, A C$866,912 lifetime capital gains exemption (which equates to a C$433,456 lifetime capital gains deduction based on the 50% of capital gains rule) can be claimed by an individual who disposes of:
- Qualified small business corporation shares
- Qualified farm property
- Qualified fishing property.
This lifetime exemption can prove particularly useful in estate planning.