7. What should I do if I sold a property and want to claim the principal residence exemption but I forget to report the designation of principal residence on my income tax return for the year of sale?
For the sale of a principal residence in 2016 or later tax years, CRA will only allow the principal residence exemption if you report the sale and designation of principal residence in your income tax return. If you forget to make a designation of principal residence in the year of the sale, it is very important to ask the CRA to amend your income tax and benefit return for that year. Under proposed changes, the CRA will be able to accept a late designation in certain circumstances, but a penalty may apply.
The penalty is the lesser of the following amounts:
- $8,000; or
- $100 for each complete month from the original due date to the date your request was made in a form satisfactory to the CRA.