For tax breaks, there's no place like home

What you need to know about the principal-residence exemption.

Matthew Elder 25 August, 2016 | 5:00PM

It's long been said that a home is the best long-term investment one can make. Indeed, real estate generally increases in value. And when the property is your home, you get a roof over your head while your capital grows. From an investment standpoint, in most cases it's financially more advantageous to make payments to a home mortgage as opposed to paying rent.

But there is another very compelling reason to invest in a home. When you sell, its appreciation in value is exempt from capital-gains tax. With other capital investments, such as stocks and real estate other than your home, one-half of any gain is taxable.

The principal-residence exemption, as it is known, is one of Canada's oldest and best tax breaks. On the surface, claiming the exemption is a very straightforward process: in most cases you don't need to report the sale of your home on your income-tax return. What's more, the tax regulations are very generous, allowing flexibility as to how a property can qualify as a principal residence. However, there are a number of wrinkles and exceptions to consider.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

About Author

Matthew Elder

Matthew Elder