Usually not on your own home. If the house was your principal residence for every year you owned it, the gain is generally sheltered by the principal residence exemption, but you must still report the sale to the CRA. Sellers do not pay Ontario land transfer tax; the buyer does. Tax can apply to rentals, second homes and homes owned less than 365 days.
Tax questions can make a sale feel riskier than it is. For most people selling the home they live in, the rules are simpler than they sound. The key is knowing which situation you are in and reporting the sale properly.
Capital gains and the principal residence exemption
When you sell property for more than you paid, the profit is a capital gain. If the home was your principal residence, the principal residence exemption can reduce that gain to zero.
A home can generally qualify for a year if you, your spouse or common-law partner, or your child ordinarily lived in it that year. A family unit can generally designate only one property as its principal residence for each year.
Even if no tax is owing, the CRA says it will only allow the exemption if you report the sale and the designation on your tax return. That means filling in Schedule 3 and Form T2091(IND) for the year of the sale. If you forget, ask the CRA to amend that year's return. The CRA may accept a late designation in some cases, but a penalty may apply. The CRA describes it as $100 for each complete month from the original due date to the date of your request, up to a maximum of $8,000.
When you may owe tax on a sale
| Situation | Why tax may apply |
|---|---|
| Rental property or investment house | Not your principal residence, so the gain is generally taxable |
| Cottage or second home | Only one property per family unit can be designated for each year |
| Years you did not live there | The exemption may cover only part of the gain |
| Part of the home rented or used for business | A change in use can affect the exemption |
| Owned less than 365 days | The residential property flipping rule may treat the profit as business income |
| Seller is not a Canadian resident | Special reporting and withholding rules apply |
When a capital gain is taxable, only part of it is added to your income. The inclusion rate is one-half. A proposed increase to two-thirds for larger gains was announced in 2024, but the federal government cancelled it in March 2025, so the one-half rate continues to apply. Example: you bought a rental for $500,000 and sold it for $800,000, with $40,000 in selling costs. The gain is $260,000, and $130,000 would be added to your income for that year. Your actual tax depends on your other income.
The 365-day flipping rule
For homes sold on or after January 1, 2023, the CRA treats the profit on a residential property you owned for less than 365 consecutive days as business income. That means it is fully taxable and the principal residence exemption does not apply.
There are exceptions for certain life events, including a death in the family, a change in household such as a new child, a relationship breakdown (the CRA sets conditions, such as living apart for at least 90 days), a threat to personal safety, serious illness or disability, a job relocation of at least 40 km, involuntary job loss, insolvency, and destruction or expropriation of the home. Each exception has conditions, so ask your accountant whether yours fits.
Who pays land transfer tax in Ontario?
The buyer. Ontario says that when you acquire land, you pay land transfer tax to the province when the transaction closes. In Toronto, buyers also pay the Municipal Land Transfer Tax. As a seller, you do not pay either one on your sale.
If you are buying another home at the same time, you will pay land transfer tax on that purchase.
Is there HST on selling a house?
The sale of a used home by an individual is generally exempt from GST/HST. HST can apply to new homes sold by builders and to some substantially renovated homes, so ask if either might describe your property.
Many selling costs do carry HST, including real estate commission and legal fees. Those costs, plus any mortgage prepayment penalty and discharge fees, come out of your sale proceeds. Our guide to selling before your mortgage term ends explains penalties, and our cash offer vs. listing guide shows how to estimate your net.
What to do before you sell
- Write down the purchase date, purchase price and major improvement costs, with receipts.
- List every year you lived in the home and any years it was rented.
- If you own more than one property, ask your accountant which one to designate for each year.
- Check whether you have owned the home for at least 365 days.
- Plan to report the sale on Schedule 3 and Form T2091(IND) when you file.
This is general information, not tax advice. Talk to your accountant about your situation before you sign.
Sources we checked
We checked these government, court and legal-information sources on September 26, 2026. Rules and amounts can change, so confirm the details for your situation with a lawyer, accountant or licensed insolvency trustee.
- Canada Revenue Agency — Principal residence and other real estate
- CRA — Guide T4037, Capital Gains
- CRA — Form T2091(IND), Designation of a property as a principal residence
- CRA — Income Tax Folio S1-F3-C2, Principal Residence
- Ontario — Land transfer tax
- City of Toronto — Municipal Land Transfer Tax
- CRA — GST/HST Memorandum 19-1, Real Property and the GST/HST
- CRA — Residential property flipping rule
- CRA — Reporting the sale of your principal residence (late designation penalty)
- Prime Minister of Canada — Cancellation of the proposed capital gains tax increase (March 21, 2025)
Common questions
Do I pay capital gains tax when I sell my home in Ontario?
Not usually, if it was your principal residence for every year you owned it. The principal residence exemption can shelter the gain, but you must still report the sale and designate the home on your tax return.
Does the seller pay land transfer tax in Ontario?
No. Ontario land transfer tax is paid by the buyer when the sale closes. In Toronto, the buyer also pays the Municipal Land Transfer Tax.
What is the 365-day rule for selling a house in Canada?
For sales on or after January 1, 2023, profit on a home owned less than 365 consecutive days is generally treated as fully taxable business income, unless a listed life-event exception applies.
Do I have to report the sale of my house to the CRA?
Yes. The CRA requires you to report the sale of a principal residence on Schedule 3 and designate it on Form T2091(IND), even when no tax is owing.
Is HST charged when I sell my house?
The sale of a used home by an individual is generally exempt from HST. New homes and some substantially renovated homes are different, and commissions and legal fees include HST.
Prepared by our team for Ontario homeowners. This is general information, not legal, tax or financial advice on a particular transaction. Editorial approach and corrections.
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