A reader asks me if her second primary residence can be sold without tax on her earnings from the sale, and if not, what does the law say?
Since one can own more than one dwelling in a personal capacity, the question can be complicated.
According to Ludovic Nadeau, tax expert, accountant and owner of Gestion financière de l’Estri: “It depends. Three main points must be taken into account.
1. You can only have one base skin at a time.
When the property is sold, if it is used as a part main residence, the years for which it was so used must be indicated.
“After selling a property in which we have lived for a few years, say an income building that we still own, we will have to declare in tax form what percentage of the building we have lived in. As owner-occupant (of his principal residence) and specify the years for which he will be taxed The portion of the building and the years not used as an owner-occupant when the building is sold.Ludovic Nadeau explains, capital gains corresponding to the portion and years used as the principal residence of the owner-occupant.
Are you renting your main residence?
A few random weeks rented in an Airbnb-mode home are possible, “provided it’s only a one-time rental, and not a huge one for the year,” adds Mr. Nadeau.
2. The ownership structure should not change significantly.
Here, there is no mention of a kitchen renovation or solarium annexation. Do your children live in the downstairs apartment that you have provided for them free of charge? Yes, it is indeed a prime family residence. Have you rented an apartment in a basement to others? This part must be declared as part of the income for the years it was used as a flat.
3. The “+1” rule.
This type of situation means we live in more than one primary residence during the same year.
For example, you have sold your primary residence and need to temporarily move into a secondary residence until you find or make a new property available. During this same fiscal year, you will have two major residences to declare. Another example, you can decide to sell your family dwelling and from now on to live permanently in your chalet, thus designating it as your main residence.
- Don’t overdo your property’s functionality: Is a small property away from urban areas really your primary residence? Avoid exaggerated statements about the possibility of a tax dispute.
- Consult a Professional: Some special cases deserve professional advice in order to get the best out of your situation without costly misrepresentation or error.
- Plan: Consulting a tax professional can help you plan your decisions to understand the tax impact of selling a property for one year rather than another.
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