Principal Residence Exemption Calculator Canada

Selling your home? Find out exactly how much is tax-free. This calculator applies the CRA's principal residence exemption formula — including the "+1 rule" — and shows your taxable capital gain if you didn't designate all years.

How the principal residence exemption works

When you sell your home, any capital gain is usually completely exempt from tax if the property was your principal residence for every year you owned it. This is Canada's most valuable personal tax shelter — but partial exemptions apply if the property wasn't your main home for the entire ownership period.

The exemption formula:

Exempt amount = Capital gain × (1 + years designated as PR) ÷ total years owned

The "+1" in the formula is the CRA's "plus one rule" — it gives you one additional year of coverage, which handles the situation where you sell one home and buy another in the same calendar year.

If the result equals or exceeds 1 (i.e., you designated enough years), the entire gain is exempt.

When you might have a partial exemption

• You rented out your home for several years before selling
• You used part of your home as a business or rental space
• You owned a cottage and a primary home simultaneously (only one can be designated per year after 1981)
• You were a non-resident during some years of ownership

What counts toward the ACB

Your adjusted cost base includes the original purchase price, legal fees and commissions paid at purchase, and permanent capital improvements (renovations that add lasting value). Routine maintenance and repairs do not increase the ACB.

Flipped property exception

Even if a property qualifies as a principal residence, the exemption does not apply if the property is a "flipped property" — defined as a housing unit sold within 365 consecutive days of purchase (unless a qualifying life event applies). Flipped property income is treated as business income, fully taxable.

Reporting requirements

Since 2016, the CRA requires you to report all home sales on Schedule 3 and complete Form T2091(IND) to designate the property as your principal residence. Failure to report can result in denial of the exemption plus a penalty.

Related tools and guides

• Canadian Capital Gains Tax Calculator
• Capital Loss Planner
• Principal Residence Exemption: Complete Guide
• How Capital Gains Tax Works in Canada (2025)
• Capital Gains Inclusion Rate — History & 2025

Disclaimer: For planning purposes only. Special situations (non-residency, partial business use, flipped property) may require different treatment. Consult a qualified Canadian tax professional.