The government is desperate for money and is on the search for new sources of revenues to finance its deficits. In anticipation of a fall election, the spring 2021 Federal Budget followed the general trend that governments spend (or say they will) before an election by announcing $101.4 billion of discretionary spending and raising the federal deficit to $154.7 billion for the 2021-22 fiscal year.
Contrary to rumours, Budget 2021 did not include measures to eliminate or cut back on the principal residence exemption (PR). Tax increases do not precede elections but follow them. We can expect them next spring after the Liberals win a majority. The exemption is rich and in the government’s sights.
The tax system is generous to Canadian residents who own homes. They are generally not taxable on any capital gains from the sale of their PR. Regardless of the value of the residence, the entire amount of the qualifying gain is exempt from tax. The law treats everyone equally: an individual who sells his PR for a gain of $35 million is treated the same as an individual who makes $30,000. Canadians cherish this tax benefit of home ownership as a source of their retirement income. What is even better, the residence can be outside Canada in a warmer climate.
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