Eligibility:
Individuals who currently have or plan to engage in property investments.
Primary Residence vs. Investment Property
For Canadian tax residents, the capital gains on the sale of a primary residence are tax-exempt. However, each household can designate only one property as a primary residence per year.
What qualifies as a principal residence?
- A home you own — a house, semi, townhouse or condo unit, together with the land it sits on.
- Lived in during the year — you, your spouse or common-law partner, or your children ordinarily lived in it.
- Designated by you — only one property per family can be designated for each year, and the sale must be reported on your tax return.
- Owned while a Canadian tax resident — residency for tax purposes, not immigration status.
- Land — generally up to half a hectare (about 1.24 acres) is covered; more only if it is needed for the use and enjoyment of the home.
Once you acquire a second property, it is classified as an investment property, and the capital gains from its sale are taxable:
- 50% of the capital gain is taxable (the capital gains inclusion rate).
The proposed increase of the inclusion rate to two-thirds for gains above $250,000 (announced in 2024) was cancelled in March 2025. The inclusion rate remains 50%.
For long-term tax planning involving multiple properties, please refer to Investment in Multiple Properties.
Pre-Construction Condo Assignments (Presale Condo Assignments)
It’s important to understand that the nature of presale condo assignments differs from other asset transactions. While most assets generate capital gains, profits from presale condo assignments with investment intent are classified as business income, meaning 100% of the profits are taxable. This indicates that the government discourages such speculative activities by imposing higher tax burdens.
Once the gains are deemed business income, presale condo assignments are also subject to sales tax (GST/HST/PST). Since these transactions are recognized as active commercial activities, the seller must remit 13% HST to the government. However, including this HST in the selling price often makes the property less competitive in the market, leading most sellers to absorb this cost within the sale price.
Example:
Jack purchased a presale condo in 2018 for $500,000 (including HST). In 2024, the market value is $700,000 (including HST).
HST on the sale price:
$700,000 ÷ 1.13 × 0.13 = $80,531HST included in the purchase price:
$500,000 ÷ 1.13 × 0.13 = $57,522Net HST payable to the government:
$80,531 − $57,522 = $23,009
This $23,009 is only the HST payable — income tax on the profit is in addition.
Summary
Tax obligations for presale condo assignments with investment intent are notably higher due to:
Gains being classified as business income and taxed at 100%.
The imposition of a 13% HST on business income.
With extensive expertise in tax and financial planning, Shengqian Accounting Firm has successfully handled numerous property investment cases. If you have tax-related questions about property transactions, feel free to consult us for professional advice.