The Canada Revenue Agency (CRA) offered tips on Wednesday for taxpayers who sold, bought or made renovations to their homes in 2020.
If your client sold property, including a principal residence, they must report the sale on their tax return for the year they sold the property.
“How you report depends on what type of property you sell,” the CRA said in a release.
Starting with the 2016 tax year, the CRA allowed the principal residence exemption only if the taxpayer reported the disposition and designation of the home on their income tax return.
If your client didn’t report the sale and designation of their principal residence in these years, they must “change their return and file a late designation for the related year as soon as possible,” the release said.
If your client sold a property that wasn’t their principal residence (such as a rental property), they must report the gain or profit.
Intention matters when buying a property, the CRA said: “If you bought a property mainly to sell it or rent it out, or if it was a secondary property and not your principal residence, you may owe tax on any resulting gain or profit.”
Read more information on reporting real estate income.
Buying or building a home
Taxpayers may withdraw up to $35,000 from their RRSPs to buy a home. The Home Buyers’ Plan (HBP) may be available to someone who is a first-time home buyer and plans to live in the home within one year of buying or building it. The taxpayer has up to 15 years to repay the total amount to their RRSP.
If a taxpayer is eligible for the disability tax credit, they don’t have to be a first-time home buyer to use the HBP.
“This also applies if you are helping a relative who is eligible for the credit to buy or build a home,” the release said. “The purchase or construction must be done to allow a person with a disability to live in a home that is more accessible or better suits their needs.”
Eligible taxpayers may also be able to claim the $5,000 home buyers’ amount if they bought a qualifying home in 2020, the GST/HST rebate on a new build and eligible renovation expenses for accessibility.
For full details, read the CRA release.