If You have held title to a property for less than 12 months please read:

The sale of residential property that an owner has held for fewer than 12 months will be considered flipping and the profits from the sale will be taxed as business income. It will apply to residential properties (including rental properties) sold on or after January 1, 2023.

The new measure became law on December 15, 2022, and introduces considerations for Canadians who are thinking about selling their residential real estate. Specifically, the sale of residential property that the owner has held for fewer than 12 months will be considered flipping and the profits from the sale will be taxed as business income. It will apply to residential properties (including rental properties) sold on or after January 1, 2023.

I have summarized the most important facts about the new anti-flipping rules to assist you if you’re considering selling your residential real estate in 2023.

What are the exceptions?

Exceptions to the new anti-flipping measure are available to individuals who sell their residential property within 12 months. These exceptions include:

• Death

• Addition to household (including birth, adoption, or of elderly parent)

• Breakdown of marriage or common-law partnership

• Threat to personal safety

• Serious illness or disability

• Work relocation (new home must be at least 40 kilometres closer to new work location)

• Involuntary termination of employment

• Insolvency

• Involuntary disposition (e.g., due to natural disaster)

Such exceptions are helpful to reduce the tax impact of the new rules for many homeowners, but it may be necessary to produce documentation to support the exception, and many other situations will fall outside of the exceptions.

Check if your sale will be impacted by the new tax

The anti-flipping rules introduce new considerations for Canadians who are thinking about selling their home or residential rental property starting in 2023. Before you put your property on the market, review the new measures enacted by the Federal Government to evaluate whether they will affect your sale. The new rules may also impact decision making for purchases of residential real estate, whether it be for personal use or investment purposes.

The CRA can assess significant penalties and interest for failure (under gross negligence) to report the gain on the sale of residential property as business income.

Thinking of Selling or Investing in the GTA this year?

Then make sure you use a proven, multi award winning Realtor and contact Michael Kelly today!