The short answer
Often there is no income tax on the gain if the home was your principal residence for every year you owned it, but CRA only allows the principal residence exemption if you report the sale and designation. Homes held less than 365 consecutive days can fall under the federal flipping rule, which treats the profit as business income unless a life event applies. In BC, the separate home flipping tax can also apply within 730 days.
Check current rules: Federal and provincial rules change through budgets. CRA’s flipping page was last modified in 2024 and the BC flipping tax pages in 2026; confirm both before you sell.
In plain English
When you sell a home for more than you paid, the gain is normally a capital gain, and the principal residence exemption can reduce or eliminate it.
CRA says a property can be a principal residence if it is a housing unit, a leasehold interest in one, or a co-op share, which you own alone or jointly, which you, your current or former spouse or common-law partner, or any of your children lived in at some time during the year, and which you designate as your principal residence.
A principal residence does not have to be a house.
CRA lists a cottage, condominium, apartment, duplex unit, trailer, mobile home or houseboat as possibilities. The land that can be included is usually limited to half a hectare, unless more is needed for the use and enjoyment of the home.
There is a family limit.
For each year, only one home can be designated as your family’s principal residence. For 1993 and later years, CRA’s definition of family includes you, your spouse or common-law partner, and your children under 18, subject to the conditions on its page.
The step people miss is reporting.
Since the 2016 tax year, CRA only allows the exemption if you report the disposition and the designation, using Schedule 3, Capital Gains or Losses, and Form T2091(IND), Designation of a Property as a Principal Residence.
CRA can accept a late designation in certain circumstances, but a penalty may apply.
Short holding periods change the picture.
Since January 1, 2023, the federal flipping rule deems profit on a residential property held less than 365 consecutive days to be business income, which does not get the principal residence exemption, unless the sale is due to a life event such as death, a household change, separation, safety, illness, job loss, relocation or insolvency.
In BC there is a third layer.
The provincial home flipping tax applies to profit on residential property disposed of within 730 days, has its own return due within 90 days, and is not harmonized with federal or BC income tax.
A primary residence can still be taxed under it, with a deduction of up to $20,000 if you qualify.
How it works
Confirm the home qualifies
Check that you or your family lived in it during each year you plan to designate, and that no other family property is designated for the same years.
Count how long you owned it
Less than 365 consecutive days can trigger the federal flipping rule; less than 730 days can trigger the BC home flipping tax.
Check life-event exceptions
Both the federal rule and the BC tax have life-event exceptions, but they are listed separately and the BC tax still needs a return for most of them.
Report the sale on your income tax return
Complete Schedule 3 and Form T2091(IND) for the year of sale, even when you expect no tax on the gain.
File the BC flipping return if required
If you owned the home less than 730 days, file the BC home flipping tax return within 90 days of the sale.
Keep records
Keep purchase and sale documents and receipts for improvements. Ask an accountant how they affect your calculation.
Example
The BC home flipping tax rate depends only on days held. These rows apply the Province’s formula to three holding periods; they are not a full tax calculation.
| Held 300 days | 20% rate |
|---|---|
| Held 400 days: 20% × [1 − (400 − 365) ÷ 365] | 18.082% rate |
| Held 730 days or more | BC flipping tax does not apply |
The federal rule looks at 365 consecutive days instead. A home held 300 days could be affected by both; a home held 400 days is outside the federal flipping rule but inside the BC tax window.
Who it applies to, and the exceptions
Usually applies to
- Canadian residents selling a home they lived in, including condos and townhouses.
- Families with more than one property, who must choose which one to designate for each year.
- Anyone selling a home within two years of buying it in BC.
Exceptions and limits
- Years when the home was not your principal residence, for example while it was rented out and another home was designated, may leave part of the gain taxable.
- Life-event exceptions can take a short-hold sale outside the federal flipping rule.
- BC flipping tax exemptions are separate and most require filing a return.
Common mistakes
- Not reporting the sale because no tax is expected. CRA only allows the exemption if you report it.
- Designating two homes for the same year within one family.
- Assuming a home you lived in cannot be caught by a flipping rule.
- Forgetting the separate BC home flipping return and its 90-day deadline.
- Guessing at the calculation for a partly rented home instead of asking an accountant.
Questions people also ask
Do I have to report the sale of my principal residence?
Yes. CRA states that for 2016 and later tax years it will only allow the principal residence exemption if you report the disposition and designation, using Schedule 3 and Form T2091(IND).
Can a condo be a principal residence?
Yes. CRA lists a condominium, apartment, duplex unit, cottage, trailer, mobile home or houseboat, as well as a house, among properties that can qualify.
Can my family exempt two homes at once?
No. Only one home can be designated as the family’s principal residence for each year.
What is the federal flipping rule?
For sales on or after January 1, 2023, profit on residential property held less than 365 consecutive days is deemed business income and is not eligible for the principal residence exemption, unless a qualifying life event applies.
Does the BC home flipping tax replace federal tax?
No. It is a separate provincial tax with its own return, not harmonized with federal or BC income tax.
What if I forgot to designate my home in the year I sold?
CRA says it can accept a late designation in certain circumstances, but a penalty may apply. Speak to an accountant promptly.
Official sources
Facts on this page come from the official sources below, reviewed October 6, 2026. Rules, amounts and dates change; confirm the current version and your own eligibility before acting. This is general information, not legal, tax or financial advice.
- Principal residence and other real estateCanada Revenue Agency
- Residential property flipping ruleCanada Revenue Agency
- BC home flipping taxProvince of British Columbia
- How to calculate your BC home flipping taxProvince of British Columbia