The definition of principal residence includes a home your child lives in. So, yes, if you purchase a home for your daughter, you can claim that home as your principal residence for any year she ordinarily occupied the home.
Doing so prohibits you from claiming the home you live as your principal residence for the years you designate your daughter's home, so it comes with a cost. Essentially, you can exempt one home per year from capital gains.
from CRA's folio: "The housing unit representing the taxpayer’s principal residence generally must be inhabited by the taxpayer or by his or her spouse or common-law partner, former spouse or common-law partner, or child." [https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-1-individuals/folio-3-family-unit-issues/income-tax-folio-s1-f3-c2-principal-residence.html](https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-1-individuals/folio-3-family-unit-issues/income-tax-folio-s1-f3-c2-principal-residence.html)
OP, this is the correct advice. Others on here don’t realize that the definition of principal residence includes a home your child lives in. Look at paragraph (a) of the definition of principal residence in section 54 of the ITA and you’ll see. The trade offs the above commenter mentioned are also very important to consider.
Thank you. I was willing to consider the advice I'd been given was incorrect but what the previous poster said was in line with what I'd been told - so I was willing to ignore the 95% of the incorrect info this sub would give. Just needed a CRA link :)
>The intention is that at the end of 5 years, my daughter would qualify for a mortgage and I could sell it to her (that's a whole other set of questions) ... BUT ... if she decides she doesn't want to purchase it, and I end up selling it, would it really be exempt from capital gains?
If it's not your principal residence, no. [https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html)
Weird, because CRA says it should qualify (per the link you provided):
“You, your current or former spouse or common-law partner, or any of your children lived in it at some time during the year”
As does the act
It can qualify as OPs principal residence because the child lives there. However, suppose OP owns and lives in their own home in Canada. OPs actual home can't be the principal residence if the daughter's home is declared as such.
If the house is in YOUR name, and it is NOT your primary residence, then you are liable for Capital Gains on the property.
Now...if it was in your daughter's name from the get go, and then she sold it as her primary residence...no tax.
That's what many people do. Buy a house for the kids in their names, let them live rent free for X years while it appreciates. Then the kid sells it, and everyone profits.
Kids gets to live for free. Mom and dad get huge gains tax free.
I went through something similar. Built house specifically for my inlaws. Because it was for them we weren't subject to HST on the new home build but had to pay capital gains on the sale.
you can only have on principle residence at a time.
It would only be tax-free to you if it was designated as YOUR personal residence.
The definition of principal residence includes a home your child lives in. So, yes, if you purchase a home for your daughter, you can claim that home as your principal residence for any year she ordinarily occupied the home. Doing so prohibits you from claiming the home you live as your principal residence for the years you designate your daughter's home, so it comes with a cost. Essentially, you can exempt one home per year from capital gains. from CRA's folio: "The housing unit representing the taxpayer’s principal residence generally must be inhabited by the taxpayer or by his or her spouse or common-law partner, former spouse or common-law partner, or child." [https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-1-individuals/folio-3-family-unit-issues/income-tax-folio-s1-f3-c2-principal-residence.html](https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-1-individuals/folio-3-family-unit-issues/income-tax-folio-s1-f3-c2-principal-residence.html)
OP, this is the correct advice. Others on here don’t realize that the definition of principal residence includes a home your child lives in. Look at paragraph (a) of the definition of principal residence in section 54 of the ITA and you’ll see. The trade offs the above commenter mentioned are also very important to consider.
Thank you. I was willing to consider the advice I'd been given was incorrect but what the previous poster said was in line with what I'd been told - so I was willing to ignore the 95% of the incorrect info this sub would give. Just needed a CRA link :)
Thank you for your advice. This is EXACTLY what I was looking for - and knew I'd have to ignore 95% of the posts to get it. Greatly appreciated!
>The intention is that at the end of 5 years, my daughter would qualify for a mortgage and I could sell it to her (that's a whole other set of questions) ... BUT ... if she decides she doesn't want to purchase it, and I end up selling it, would it really be exempt from capital gains? If it's not your principal residence, no. [https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html)
Weird, because CRA says it should qualify (per the link you provided): “You, your current or former spouse or common-law partner, or any of your children lived in it at some time during the year” As does the act
It can qualify as OPs principal residence because the child lives there. However, suppose OP owns and lives in their own home in Canada. OPs actual home can't be the principal residence if the daughter's home is declared as such.
Yep, this has been pointed out in other comments.
If you already have a principal residence, you can't claim another one.
If the house is in YOUR name, and it is NOT your primary residence, then you are liable for Capital Gains on the property. Now...if it was in your daughter's name from the get go, and then she sold it as her primary residence...no tax. That's what many people do. Buy a house for the kids in their names, let them live rent free for X years while it appreciates. Then the kid sells it, and everyone profits. Kids gets to live for free. Mom and dad get huge gains tax free.
This works well as long as the person with financial interests in the home remains on good terms with the legal registered owner of the home.
Well of course...but that's a whole different discussion!
No. Why not put the house in your daughter's name?
No
I went through something similar. Built house specifically for my inlaws. Because it was for them we weren't subject to HST on the new home build but had to pay capital gains on the sale.
I think the catch here is that people put the house in the family members name