Your home is your best tax break

How to make the best use of the principal-residence exemption if you own more than one property.

Matthew Elder 11 January, 2016 | 6:00PM

A home is the biggest single investment most of us ever make. Not only does it put a roof over your head, it probably is going to gain in value. But there's an additional, significant kicker that comes from, of all sources, the tax man. When you sell your home for more than you paid for it, the profit is not subject to tax, thanks to the capital-gains exemption on the sale of a principal residence.

The tax-free status is a good reason for young people to jump into home ownership as soon as they can muster a down payment. It's also enough to keep empty-nesters or retirees in the family home or, alternatively, downsize their home equity to a smaller house or condominium, rather than move to a rental apartment.

Of course, continued home ownership during one's retirement years makes sense only if it remains practical to leave a considerable sum of capital tied up in real property, along with paying property taxes and dealing with the ongoing expense and hassle of maintenance and repairs. And in the case of condos, owners face not only ever-increasing condo fees, but also the possibility of substantial capital levies for repairs or renovations to common elements.

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Matthew Elder

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