Income tax considerations
Principal residence exemption (PRE)
Ownership through a family trust
Estate planning considerations
1 We generally refer to a vacation property as a cottage in this article.
2 For U.S. vacation property planning, read our report Your U.S. vacation property could be quite taxing (PDF, 145 KB) Opens in a new window..
3 Starting in 2023, if you own a property in Canada for less than 365 consecutive days prior to its disposition, the “flipped property” rules may apply so that any gain realized is taxable as business income and not as a capital gain. As such, the PRE will not be available, and the entire gain is taxable as 100% business income. Exceptions exist for a number of life events including the death of the individual or a related party, an addition to a household, breakdown of a relationship, a threat to personal safely, serious illness or disability, work relocation or termination, insolvency or destruction or expropriation of the home.
4 In this article, spouse refers to someone to whom you are legally married. Partner refers to a common-law partner under the Income Tax Act, which means someone who cohabits with you in a conjugal relationship, provided the two of you have cohabited for the past 12 months or are jointly parents of a child.
5 This assumes taxation at the highest marginal tax rate in Ontario.
6 For more information about rental properties, read our report So…you wanna be a landlord? (PDF, 215 KB) Opens in a new window.