A reader asks me if it is possible to sell her second principal home without being taxed on her gain from the sale and if not what does the law say?
As a private individual can own more than one home, the question can be complex.
According to Ludovick Nadeau, tax specialist and owner of Gestion financière de l’Estri: “It depends. Three main points must be considered.
1. You can only have one primary residence at a time.
If the property was partly used as a main residence, the years of use as such must be stated when selling.
“After selling a property that we have lived in for a number of years, for example an investment home that we still own, we must state on a tax form what percentage of the building we were owner occupiers (for his primary residence) and state , for which years. The portion of the building and years not used as owner occupancy will be taxed upon sale of the building. The capital gain corresponding to the portion and years used as the owner’s principal residence is not taxed,” explains Ludovick Nadeau.
Do you rent out your primary residence?
A few random weeks renting the home in Airbnb mode is possible, “provided it was just a one-time rental and not massively over the year,” adds Mr. Nadeau.
2. The ownership structure must not have changed significantly.
There is no reference to the renovation of the kitchen or the extension of the solarium. Do your children live in the apartment in the basement that you set up for them free of charge? Yes, it is indeed a primary family residence. Have you furnished an apartment in order to rent it out in the basement? This part must be declared as an income share for the years in which it was used as a dwelling.
3. The “+1” rule.
This type of situation means we live at more than one primary residence in the same year.
For example, you have sold your main residence and need to temporarily move to your secondary residence until you find a new property or make it accessible. This means that you have two primary residences to declare in this tax year. As another example, you could decide to sell your family home and live in your chalet permanently, making it your primary residence.
Advice
- Don’t exaggerate the function of your property: Is a tiny plot of land away from the metropolitan areas really your main residence? Avoid making an exaggerated declaration that could contest the tax.
- Consult a professional: some special cases deserve professional advice to get the best out of your situation, without costly misrepresentations or errors.
- Plan: Consultation with a tax professional can help you plan your decisions to understand the tax implications of selling a property one year rather than another.
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