Primary residence turned into rental advice

3 Replies

Hi Everyone, 

looking for some clarity on captial gains on a primary residence that I will  be renting out after I move into my new house.

if I decide to sell my first house that I turned into a rental after 5 years, will I pay based on The difference of fair market value at the time I turned it into a rental or all of it?

Also should I get it the primary turned rental appraised?

any advice is much appreciated !

@Phil Truong

Your adjusted cost base for capital gains will be the fair market value when you move out. I did this, there are no rules from CRA about you need a valuation from an appraiser, there's really lack of clarity there, atleast the last time I checked in 2015

But there is a tax form you should fill out stating when you move out and the estimated fair market value is.

Hello @Phil Truong ... welcome to BP.  The explanation is a little complicated but here is the tax bulletin: https://www.canada.ca/en/reven... 

From my read on it, since you can only have one principal residence your first house will be deemed disposed when you move into your new house. Capital gains will be assessed based on FMV at the time of deemed disposition. I would strongly recommend that you get your accountant involved in this one (I am not an accountant).

Chris

Appraisal is needed when you change use to residential since you only pay capital gains from the year it becomes a rental to when you sell it. You'll also need to note the house as sold on your taxes the year you make the change of use - which seems weird but is correct.