When you sell an investment property like a rental home, vacation condo, or bare land in Canada, you'll owe capital gains tax on the profit. The taxable capital gain is half of your total profit (50% inclusion rate for 2026), and only this taxable amount gets added to your income and taxed at your marginal rate. The calculation starts with your selling price minus your adjusted cost base (the original purchase price plus any capital improvements you made), then multiply that profit by 50% to find what's actually taxable. The biggest tax difference is that investment properties don't qualify for the principal residence exemption. Your primary residence is generally tax-free when you sell it, but investment properties are not. This includes rental properties, vacation homes you don't claim as your primary residence, commercial buildings, and vacant land held for investment. If you own multiple properties, the CRA only allows one principal residence exemption per household, so you need to choose carefully which property gets this protection. Your adjusted cost base (ACB) is the starting point for any capital gains calculation.
No. Only your principal residence qualifies for the principal residence exemption. Rental properties and investment real estate are subject to capital gains tax when sold. You can only claim one property per year as your principal residence.
No. Capital gains are only reported in the tax year you actually sell the property. Unrealized gains on property you still own are not taxed. You report the gain on Schedule 3 of your tax return for the year of sale.
Improvements add to your ACB if they add lasting value to the property (new roof, addition, foundation work). Repairs keep the property in working order but don't add lasting value (painting, fixing a leak, routine maintenance). Repairs are deductible rental expenses but don't increase your ACB.
No. You must report the entire capital gain in the year you sell, based on the CRA definition of 'disposition.' However, you can use capital losses from the same year or previous years to offset gains and potentially reduce your tax burden.
Capital gains from property outside Canada are generally still taxable in Canada. You must report them the same way as Canadian property. Some countries may also tax the sale, creating potential double taxation, so consult a cross-border tax professional.