Taxes in real estate – seller’s edition

You sold residential or commercial piece real estate at a gain. Congratulations. Below, is a brief overview of certain types of taxes you, as a seller of real estate, may encounter.

(a) Capital Gains Tax. If,

i. you have always lived at the property, then the property will likely be characterized as your principal residence. The sale of your principal residence is not subject to capital gains tax, but is to be reported in your next tax return. This is known as the principal residence exemption;

ii. the property was not your principal residence, then half of the gain you received from the sale will likely be taxable.

(b) Withholding Tax. If you are a non-resident, then the procedure set out below is designed to ensure payment of income tax.

i. You are required to advise the Minister of National Revenue of the contemplated sale and pay a certain amount of tax, in advance, on the amount the sale price exceeds the price you purchased the property at. In return, the Minister will issue you a Certificate.

ii. If you are unable to obtain the Certificate, or the sale price is higher than listed in the Certificate, the Purchaser will be required to deliver part of the sale proceeds to the Receiver General.

iii. A final settlement of tax will occur when your income tax return is assessed. The tax may be reduced or eliminated, such as if you qualify for the principal residence exemption.