Flipping houses or condos? Know your tax obligations!
What is property flipping?
Property flipping is when individuals, including real estate agents, buy and resell homes in a short period of time for a profit. This also includes buying and selling a property before its official sale or construction—a process called an “assignment sale” but sometimes also referred to as “shadow flipping”.
Tax obligations related to property flipping:
You must report the money you make on all real estate transactions, including flips and assignment sales (of both pre-construction and resale homes), to the Canada Revenue Agency (CRA).
This could also include fees or commissions generated on these transactions.
Know your tax obligations:
- The profits you make from flipping real estate are generally considered to be fully taxable as business income.
- The principal residence exemption does not apply to property flipping.
- These transactions may also be subject to GST/HST which you would be responsible for remitting to the CRA.
The CRA is taking action to address non-compliance in the real estate sector, and to ensure that the principal residence tax exemption is claimed only by those who are eligible for it.
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