Principal Residence Exemption
You lived in this property as your primary home for the full ownership period. Under the PRE, the entire capital gain is tax-free — no matter how large.
Capital Gain at 50% Inclusion
Held 1 year or more. Only half of the capital gain is added to your taxable income, then taxed at your marginal rate. No principal residence exemption available.
Sold Under 365 Days
Since 2023, selling a residential property within 365 days triggers the flip rule: the entire profit is business income — taxed at your full marginal rate, with no 50% discount and no exemption.
Lived In, Then Rented Out
You lived in the property for some years, then converted it to a rental. The PRE covers only the years it was your primary residence (+1 bonus year). The remainder is a capital gain.
| Scenario | Inclusion | Taxable income added | Tax (top bracket) | Tax (mid bracket) | You keep | Risk |
|---|---|---|---|---|---|---|
| Primary residence | 0% | $0 | $0 | $0 | $200,000 | None |
| Rental (1+ yr) | 50% | $100,000 | $53,530 | $43,410 | $146,470 | Medium |
| Partial exemption (60% primary) | 50% on 40% | $40,000 | $21,412 | $17,364 | $178,588 | Low–Med |
| Flip — under 1 yr | 100% income | $200,000 | $107,060 | $86,820 | $92,940 | High |
| Income bracket | Combined marginal rate | Capital gains rate* | |
|---|---|---|---|
| Up to $52,886 | 20.05% | 10.03% | |
| $52,886 – $90,200 | 29.65% | 14.83% | |
| $90,200 – $111,733 | 33.89% | 16.95% | |
| $111,733 – $150,000 | 43.41% | 21.71% | |
| $150,000 – $220,000 | 47.97% | 23.99% | |
| Over $220,000 | 53.53% | 26.77% |
* Capital gains rate = combined marginal rate × 50% inclusion. Applies to rental / investment property held 1+ year.