Under the Income Tax Act, which property qualifies for the principal residence exemption from capital gains tax?
Correct Answer
D) A property ordinarily inhabited by the taxpayer or their family
The principal residence exemption applies to a housing unit that is ordinarily inhabited by the taxpayer, their spouse, or their children during the year. The property must be designated as the principal residence and can include up to half a hectare of surrounding land.
Why This Is the Correct Answer
Under the Income Tax Act, the principal residence exemption applies to a housing unit that is ordinarily inhabited by the taxpayer, their spouse, former spouse, common-law partner, or children during the taxation year. The key requirement is ordinary inhabitation - the property must serve as the family's primary dwelling place. This exemption allows taxpayers to exclude capital gains from the sale of their principal residence from taxable income, making it one of the most valuable tax benefits for homeowners.
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More Real Estate Taxation Questions
In Alberta, property taxes are primarily used to fund which level of government services?
Does Alberta charge a provincial land transfer tax when purchasing real estate?
In Ontario, who is responsible for paying the land transfer tax when a property is purchased?
A Toronto resident owns two properties: their principal residence worth $800,000 (purchased for $400,000) and a cottage worth $500,000 (purchased for $300,000). If they sell both properties in the same year, what is their total taxable capital gain?
What is the primary purpose of municipal property taxes in Canada?
- → In Ontario, what is the standard Land Transfer Tax rate for a residential property purchase of $400,000?
- → Which of the following best describes when land transfer tax is typically paid?
- → A first-time buyer purchases a $450,000 home in Ottawa, outside the City of Toronto. Which land transfer tax relief can they claim?
- → Which type of real estate transaction is generally exempt from GST/HST in Canada?
- → A first-time home buyer signs an agreement in May 2026 to buy a newly built home in Ontario from a builder for $450,000 before tax, to live in as a primary residence. If all conditions are met, what is the most HST that can be rebated under the federal and Ontario rebates combined?
- → A buyer purchasing a $2 million commercial property in Alberta asks what provincial land transfer tax will be due on closing. What is the correct response?
- → Under the Income Tax Act, what is the principal residence exemption?
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- → Under Ontario's Assessment Act, how often does the default schedule call for property to be revalued for assessment purposes?
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