To start with, your home is not automatically considered a principal residence. A vacation property such as a mobile home, houseboat or cottage, may also qualify as a principal residence, even if it is lived in only a few months of the year. Since a principal residence may be located outside Canada, your snowbird retreat may be eligible. You can choose which property to designate, but you can have only one at a time.
Capital gain is the net difference between the sale price and the cost of a property.
He encourages owners with more than one property to keep track of purchasing costs, such as legal fees and land transfer tax, and capital expenditures, such as renovations and improvements, which may be added to the cost of the property to reduce any eventual gain on selling. Renting out some or all of your principal residence may threaten its tax-free status, according to Mr. Ball, who says professional advice can minimize the tax owing. If you take in boarders, the entire property should still qualify when it is sold, provided you live in part of the house. To preserve the principal residence status if you rent out your entire property, you must limit the rental to four years, not claim depreciation and file an election or notice with CCRA stating your wish to preserve the principal residence status. Canada Customs and Revenue Agency states you cannot designate a property as a principal residence if you claim depreciation, which is loss of value for the building as it ages.