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Implications of selling a home

Implications of selling a home

Old Jun 21st 2024, 2:13 am
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Default Implications of selling a home

Hello group,

I am moving to Toronto in September 2024 and I will become a Canadian tax resident in October 2024 when I start my job on a work permit.
We are British citizens and our house is currently for sale in the UK (which is our principle home). When we get to Canada we will be renting for 12 months at least.
If our house sale is agreed AFTER we arrive in Canada, would I need to:

a.) declare this on my tax return
b.) be liable for any capital gains tax?

Thank you in advance
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Old Jun 21st 2024, 4:36 am
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Default Re: Implications of selling a home

It is such a shame the powers that be discontinued the wiki as it was all there ...

The short version is that yes, you must include this, and any rental income, on your tax return. It is possible that you will be liable for capital gains tax. To calculate this take the money you received from the sale (sales price less legal and estate agent fees) at the exchange rate on the day of the sale. Deduct the market value of the house on the day you moved to Canada at the exchange rate on that day. If this is positive you add 1/2 of the difference to your taxable income. If the gain is greater than $250,000 you add 2/3 of the amount above $250,000.

It will be helpful if you get an independent valuation of your house just before you move to Canada.
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Old Jun 21st 2024, 6:45 am
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Default Re: Implications of selling a home

Originally Posted by JonboyE
It is such a shame the powers that be discontinued the wiki as it was all there. .....
Some of the wikis got turned into "Read me" sticky threads in the relevant forum, but if what you're talking about has gone, you should be able to recover it from the Wayback Machine (I think you need to go back about 10 months or more to find the wikis) and then get a Moderator to add it as a new "Read me" sticky thread
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Old Jun 25th 2024, 5:46 am
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Default Re: Implications of selling a home

Yep - even though you are renting CRA will take your UK primary residence as a second home as you will be residing/working here. Fingers crossed you sell before then!
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Old Jun 28th 2024, 8:29 am
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Default Re: Implications of selling a home

Thank you all for your replies- this has come as a shock because in my mind I thought that a primary residence in the UK would be treated as a primary residence in Canada, irrespective of the fact that I am renting in Canada whilst I sell the house in the UK.
So that I understand you correctly, for illustrative purposes: (assuming I move to Canada in Sep 2024), if the sale value in Nov '24 is $100,000, and at the time just before I depart for Canada it is $90,000 (in Sept '24), then I would be liable for CGT on the $10,000 capital gain which equates to $5000 declared on my tax return for this financial year?

They DO NOT calculate CGT from the moment I first purchased the property 10 years ago, but instead on the capital gain from the moment I land in Canada only?
Also, if I spent any money on home improvements over the 10 years, is there a rebate for this?

Thank you in advance
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Old Jun 28th 2024, 5:31 pm
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Default Re: Implications of selling a home

Originally Posted by hicanada
Thank you all for your replies- this has come as a shock because in my mind I thought that a primary residence in the UK would be treated as a primary residence in Canada, irrespective of the fact that I am renting in Canada whilst I sell the house in the UK.
So that I understand you correctly, for illustrative purposes: (assuming I move to Canada in Sep 2024), if the sale value in Nov '24 is $100,000, and at the time just before I depart for Canada it is $90,000 (in Sept '24), then I would be liable for CGT on the $10,000 capital gain which equates to $5000 declared on my tax return for this financial year?

They DO NOT calculate CGT from the moment I first purchased the property 10 years ago, but instead on the capital gain from the moment I land in Canada only?
Also, if I spent any money on home improvements over the 10 years, is there a rebate for this?

Thank you in advance
Well you can only have one primary residence at any one time. If you are not normally residing in a house then how can it be your primary residence?

Your hypothetical figures are accurate. You won’t get any allowance for improvements made before you come to Canada but you can use expenses related to sale (agents fees, solicitors fees etc…) to reduce the gain. Also you can offset any CGT paid in the UK, if any.
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Old Jun 29th 2024, 3:17 am
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Default Re: Implications of selling a home

Hi there,

I am not exactly sure that your assertion/question (hope!!!) is entirely correct for the following reason:

Our former realtor is Austrian. She bought a house here in NS 29 years ago while she was renting over there. She moved in two years later, did lots of renos and lived in it for 26 1/2 years before selling it last year. CRA are now coming after her for the CGT on the entire amount of profit over that 29 year span and not, as common sense/decency should dicate, the first two years she didn't live in it as her primary residence. She is having to challenge that through her lawyer. We are also concerned as we look to sell our house as we moved here 6 months after we bought it.

If you can't sell before hand - or delay your work start date - that expert advice becomes more crucial because as soon as you move here your UK home becomes a secondary property. At the very least it will launch your new adventures in Canada with a sour tasting start, but also possibly leave you quite a few quid out of pocket!! Not good.

Wish you the very best of luck.

Last edited by RedCanuck; Jun 29th 2024 at 3:20 am.
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Old Jun 29th 2024, 3:18 am
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Default Re: Implications of selling a home

Originally Posted by bc2015
Well you can only have one primary residence at any one time. If you are not normally residing in a house then how can it be your primary residence? ....
Primary residence exemptions often extend for a period after you move out; I believe it was reduced to six months in the UK a few years ago.

So while intuitively you are correct, and can only have one primary residence, in fact you can have the tax benefits of owning a primary residence for an extended period after you move out, even if you have a new primary residence that also has potential tax benefits.

Last edited by Pulaski; Jun 29th 2024 at 3:22 am.
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Old Jun 29th 2024, 5:13 am
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Default Re: Implications of selling a home

Originally Posted by hicanada
Thank you all for your replies- this has come as a shock because in my mind I thought that a primary residence in the UK would be treated as a primary residence in Canada, irrespective of the fact that I am renting in Canada whilst I sell the house in the UK.
Your position regarding ownership of, and residence in, this house before you become tax-resident in Canada is irrelevant for Canadian tax purposes. Your primary residence (for Canadian tax purposes) does not have to be in Canada, but you must have lived in it at some point in the year (after you became tax-resident here) to claim it as a primary resident. Because it is rented to others strongly suggests that it is not your primary residence.

So that I understand you correctly, for illustrative purposes: (assuming I move to Canada in Sep 2024), if the sale value in Nov '24 is $100,000, and at the time just before I depart for Canada it is $90,000 (in Sept '24), then I would be liable for CGT on the $10,000 capital gain which equates to $5000 declared on my tax return for this financial year?
Yes, but don't forget the effect of exchange rates. I know you say the above is for illustration only, but if this was a real scenario I would not be too concerned. I would get a written recommendation for your estate agent for the listing price before you leave in September. Then list the house at that price. As I remember (though it is a while ago now) buyers usually offer less than listing price and you end up selling at somewhere between the buyer's first offer and the listing price. i.e. no capital gain.

They DO NOT calculate CGT from the moment I first purchased the property 10 years ago, but instead on the capital gain from the moment I land in Canada only?
Correct.

Also, if I spent any money on home improvements over the 10 years, is there a rebate for this?
Only if you made the improvements after you moved to Canada.

Thank you in advance
When you get to Canada go and see an accountant for some real advice.
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Old Jun 29th 2024, 6:42 am
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Default Re: Implications of selling a home

Am I the only person not hugely bothered about CGT in this scenario?

Using the above example, value on moving to Canada, $90k and value on sale is $100k.
There's a total gain of $10k of which half is taxable.Depending on which province and how much you get paid, tax might be around 35-40%?

So you're still keeping at least 60% of your "good fortune."
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Old Jun 29th 2024, 6:49 am
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Default Re: Implications of selling a home

Originally Posted by BristolUK
Am I the only person not hugely bothered about CGT in this scenario?

Using the above example, value on moving to Canada, $90k and value on sale is $100k.
There's a total gain of $10k of which half is taxable.Depending on which province and how much you get paid, tax might be around 35-40%?

So you're still keeping at least 60% of your "good fortune."
Not at all. I love paying CGT.
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Old Jun 29th 2024, 2:19 pm
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Default Re: Implications of selling a home

Originally Posted by BristolUK
Am I the only person not hugely bothered about CGT in this scenario?

Using the above example, value on moving to Canada, $90k and value on sale is $100k.
There's a total gain of $10k of which half is taxable.Depending on which province and how much you get paid, tax might be around 35-40%?

So you're still keeping at least 60% of your "good fortune."
Unfortunately those were only example numbers, and a home in the UK could easily sell for GBP300,000, which is over CAD500,000, or 2-3 times that, or more, in the London area. So while tax on CAD10,000 might be modest, perhaps less than the cost of transatlantic plane tickets for a family, the actual capital gain, and the tax due on it may be considerably larger!
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Old Jun 30th 2024, 1:34 am
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Default Re: Implications of selling a home

Originally Posted by Pulaski
Unfortunately those were only example numbers, and a home in the UK could easily sell for GBP300,000, which is over CAD500,000, or 2-3 times that, or more, in the London area. So while tax on CAD10,000 might be modest, perhaps less than the cost of transatlantic plane tickets for a family, the actual capital gain, and the tax due on it may be considerably larger!
While this is true, the gain after the CGT is still the larger part.
(especially when it's something you just got lucky with)

I'll happily accept half a million and give less than half of it back
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Old Jun 30th 2024, 2:17 am
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Default Re: Implications of selling a home

Originally Posted by BristolUK
While this is true, the gain after the CGT is still the larger part.
(especially when it's something you just got lucky with)

I'll happily accept half a million and give less than half of it back
That's easy to say when it isn't your half million.🙄 Also when you make sharing it sound altruistic, but you wouldn't be sharing it with a women's shelter, animal rescue, or charity of your choice. And when it is perfectly legal to arrange your life to minimize the tax you pay* - in this case the amount involved would be enough to make postponing moving out a profitable decision, or offering a sale price discount to a buyer able to complete the purchase by a certain date.

* Jeff Bezos recently moved from Washington state to Florida, which has no income tax, ahead of selling some of his Amazon stock. The tax bill he saved, by not having to pay Washington income tax, was more than the $500million his 417ft (127m) yacht cost. And of course there is no reason why he can't move back to Washington again if he feels like it.
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Old Jun 30th 2024, 2:32 am
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Default Re: Implications of selling a home

Originally Posted by Pulaski
That's easy to say when it isn't your half million.
If using my "skill and judgment" I played spot the ball or successfully predicted 8 draws on the football coupon, I might feel a bit different about paying tax on the winnings that came from my efforts.

But if I'd simply bought a house and through nothing to do with me house prices went through the roof so that I stood to gain a few hundred grand out of pure luck (and maybe the misery of people who could now not afford to buy) I can say it would be very easy for me to accept "only" the lion's share of the gain.
I wouldn't grumble at all.
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