Principal Residence Exemption Calculator
Calculate the tax on a Canadian home sale using the principal residence exemption (PRE) formula under ITA s.40(2)(b). Covers the "+1" bonus year, residential flipping rule, non-resident restriction, and T2091 late-filing penalty.
Property & Sale Details
Commissions, legal, staging
Adds to ACB (not repairs)
Ownership & PR Designation
One property per family per year
<365 days = flipping rule
Income & Filing
$100/mo, max $8,000
Fully Exempt — No Tax
Tax Breakdown
| Taxable amount added to income | $0 |
| Federal tax on gain | $0 |
| Provincial tax on gain | $0 |
| Total tax + penalty | $0 |
| Effective rate on gain | 0.0% |
| Net cash to seller | $855,000 |
Report on Schedule 3 + Form T2091(IND) with your T1 return, even if fully exempt. Since Oct 3, 2016, failure to report triggers a late-designation penalty (lesser of $100/month late or $8,000 under ITA s.220(3.21)).
How the PRE works
Formula: Exempt gain = capital gain × (1 + years designated) / years owned.
+1 bonus year: Covers the common case of selling one home and buying another in the same year — both would otherwise need designation. Not available for the year of acquisition if you were non-resident (post-Oct 3, 2016 rule).
Flipping rule (s.12(12)): From Jan 1, 2023, residential property held less than 365 consecutive days is deemed business income at 100% inclusion. No PRE. No 50% capital gain rate. Nine life-event exceptions apply.
One property per family per year: Since 1982, a family unit (spouse/common-law partner + unmarried minor children) can designate only one property as principal residence per year. Cottages and city homes compete.
Reporting: Schedule 3 + Form T2091(IND) are mandatory even when fully exempt. Late designation costs $100/month (max $8,000).
Frequently asked questions
How is the principal residence exemption calculated?
Exempt gain = capital gain × (1 + years designated) / years owned. The "+1" bonus covers selling + buying in the same year. One property per family per year.
Do I need to report the sale of my principal residence?
Yes — Schedule 3 + Form T2091(IND), even if fully exempt. Late-filing penalty $100/month, max $8,000.
What is the residential property flipping rule?
Property held <365 days = business income, 100% inclusion, no PRE. Exceptions for death, separation, relocation, illness, and others.
Can non-residents claim the PRE?
Years of non-residence cannot be designated. The "+1" bonus is unavailable if non-resident at acquisition (post-Oct 3, 2016).
What counts as capital improvements?
Permanent value-adding changes (new roof, renovation, addition) add to ACB. Routine repairs do not.
Sources
Last updated April 2026. Reflects TY2025 rules (50% inclusion rate). Consult a tax professional for complex situations.
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