![]() An exemption of up to $100,000 was available until 1994 and taxpayers were allowed to bump up their cost base on eligible capital property like cottages by up to $100,000 on their tax returns that year.Ī sale of property to a family member or someone who you are not dealing with at “arm’s length” generally takes place-for tax purposes-at fair market value. ![]() If you sell your house after 30 years of ownership, 10/30ths will generally be subject to capital gains tax.Īnother consideration is whether a capital gains exemption was declared in 1994 if you inherited the property prior to that time. However, claiming a cottage as your principal residence may expose your home to capital gains tax in the future since you will be limiting the number of years it can qualify as your principal residence.įor example, if you have owned your house for 20 years and your cottage for 10 years and claim the cottage as your principal residence, you will lose 10 years for your house. It does not need to be the primary place that you live. A cottage can qualify as your principal residence as long as you ordinarily inhabit it. The sale of a principal residence is generally tax-free. There are nuances related to real estate like whether or not a property might qualify as a principal residence. A large capital gain-for example, on a piece of real estate-can easily push you into a higher tax bracket.Īsk a Planner: Submit your question » What qualifies as a principal residence and other exemptions For real estate, it’s based on the sale price, minus the selling costs, capital improvements made to the property, and your adjusted cost base (ACB) or acquisition cost.Īlso, it’s important to know that 50% of a capital gain is taxable and is added to your other sources of income for the tax year. There are tax implications to be aware of here, Johanna.įirst, a primer on how capital gains tax works. Capital gains and transferring property between familyĪsset sales between family members can be tricky to facilitate at a family level, let alone from a tax perspective. ![]()
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