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Buying a home brings transfer tax in many provinces, and sometimes GST or HST. Selling your own home is usually tax-free when it's your principal residence, while a rental or second property is taxed on half of the gain.
Property touches your taxes at four moments. When you buy, you pay a transfer tax at closing, plus GST or HST on a new home. While you own, you pay municipal property tax. Rent is taxable income, and selling your principal residence is usually tax-free as long as you report it. Anything else you sell, like a rental or a cottage, can produce a capital gain where half is added to your income.
What does buying a home cost in tax?
Besides the GST or HST on a new home, you’ll pay a transfer tax when the sale closes, and the amount differs by province, so check yours before you set a budget. Use the land transfer tax calculator for Ontario, the property transfer tax calculator for British Columbia, or the welcome tax calculator for Quebec. The closing costs calculator adds the rest, and the closing costs checklist by province lists what to expect where you live.
Saving for a first home? The FHSA lets you deduct up to $8,000 a year, with a $40,000 lifetime limit, as the limits page explains. The CRA’s page on FHSA tax deductions covers the deduction. The FHSA calculator and the first-time buyer benefits calculator show what that could be worth.
What tax do you pay while you own a home?
Municipal property tax, mostly. You can’t deduct it on the home you live in, and rates vary by city. The property tax calculator estimates it. Set aside a ballpark monthly amount based on that estimate.
How is rental income taxed in Canada?
You report the rent, subtract what it cost you to earn it, and pay tax on the rest at your own rate. Keep a record of every cost. The rental income tax calculator works out the result, and the rental property calculator looks at whether the numbers work in the first place.
What happens when you sell a property?
The home you live in usually isn’t a taxable gain when it qualifies as your principal residence, though you’ll still report the sale. Anything else, such as a rental or a cottage, can produce a gain. Half of a capital gain is added to your income, and the capital gains tax calculator shows the bill. The principal residence gain calculator estimates the gain on your own home, and the home sale proceeds calculator shows what you’d take home.
Say Amrit buys a cottage for $200,000 and later sells it for $300,000. Ignoring selling costs, the gain is $100,000, and half of it, $50,000, goes onto the return as income.
Do you have to report the sale of your own home?
Effective 2016 and later tax years, the CRA will only allow the principal residence exemption if you report the disposition and designation of your principal residence on your income tax and benefit return.
Principal residence, canada.ca
So yes, even when you owe nothing. Skipping that step can cost you the exemption.
More about property and tax
- Home Equity and Tax in Canada: What Applies
Is a home equity loan taxed? Learn when the interest is deductible, how the principal residence exemption works and what a $95,000 gain costs
- How the First-Time Home Buyers’ Tax Credit Works
Claim a $10,000 amount on your first home, then add the FHSA, the Home Buyers' Plan and Ontario's $4,000 refund. See what each one is worth
- Home Office Deductions You Can Claim in Canada
On $70,000 in Ontario, a $1,200 home work-space claim saves $355.80. See who qualifies, the T2200 rule and which costs the CRA lets you deduct
- Abbotsford Property Tax: Due Date, Grant and Payment
Your Abbotsford bill is due the first working day after July 1. See how the tax is worked out, the 2026 home owner grant and how to avoid card fees
- Home office tax deduction in Canada for employees
Working from home as an employee? Learn the T2200, the 50% test, which costs count and what a $2,400 home office claim saves in Ontario
- How to Claim Business Use of Home Expenses
Business owners can deduct part of their home costs. See the two CRA tests, how to find your workspace share and a worked $1,200 claim
- $200,000 in Ontario: Weekly, Biweekly and Monthly Pay
A $200,000 salary in Ontario nets $131,278 a year: $5,049 biweekly or $10,940 monthly. See pay for each pay schedule and why 26 cheques differ.
- Capital Gains on Gifted Property in Canada
Gifting property counts as a sale at market value, so capital gains hit the giver. See the spouse and home exemptions and a $400,000 example
Frequently asked questions
Do I pay tax when I sell my home?
Selling the home you live in usually isn't taxed as a capital gain when it qualifies as your principal residence. The sale still has to be reported on your return.
What is land transfer tax?
A one-time tax on the purchase price when you buy property. Ontario calls it land transfer tax, British Columbia property transfer tax, and Quebec welcome tax.
How much of a capital gain is taxed?
Half of it. The inclusion rate is 50%, so half the gain is added to your income and taxed at your rate.
Is rental income taxed?
Yes. You report rent as income and deduct the costs of earning it, and you pay tax on what's left.
How much can I put into an FHSA?
The FHSA lets you deduct up to $8,000 a year, with a $40,000 lifetime limit. The CRA explains the deduction on its page about FHSA tax deductions.
What costs come with buying a home besides the price?
GST or HST on a new home, a transfer tax when the sale closes, and other closing costs. The amounts differ by province, so check yours before you set a budget.