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Capital gains tax on BC real estate

Half of a capital gain on BC real estate is added to your income, which is 26.75% of the gain at the top federal and BC rates. Your own home is usually exempt. A rental adds recapture of depreciation, and a sale within a year adds a flipping tax.

The 50% inclusion rate

The inclusion rate is 50%, and the planned increase to two-thirds was cancelled on March 21, 2025. The increase would have applied to gains above $250,000 a year for individuals and to every gain for corporations and most trusts.

The top federal rate is 33% and the top BC rate is 20.5%, which makes 53.5% combined. Half of that is 26.75%. Lower brackets pay less, so the figures below are the high end.

Selling your own home

If the property was solely your principal residence for every year you owned it, you pay no tax on the gain. You must still report the sale on Schedule 3 and file Form T2091(IND). The CRA only allows the exemption if you do.

  • A family can designate only one home as its principal residence for each year.
  • The land counts up to half a hectare, unless you show you need more to use and enjoy the home.
  • A home that was a rental for some years has a taxable part for those years.

Own here? Enter your address and Your Home opens its page.

Selling within a year or two

Two separate rules tax a quick sale, and they stack. Neither takes away the other.

  • Federal, under 365 days: the gain is business income, taxed in full, with no principal residence exemption. Listed life events are exceptions, including a death, a breakdown of a marriage, a serious illness, a move at least 40 km closer to work or school, and an insolvency.
  • BC, under 730 days: 20% of net taxable income if you owned it 365 days or less. The rate falls over the next 365 days and ends at 730 days. You file a BC return within 90 days of the sale. A primary residence deduction of up to $20,000 applies if you lived there and owned it at least 365 days.

Selling a presale before it completes is the common case: see selling a presale assignment. The net proceeds calculator applies both rules to your own purchase and completion dates.

If the property was a rental

Depreciation you claimed on a rental building comes back as income, in full, when you sell. It is added to the capital gain and does not reduce it.

Tax on a rental sale with depreciation claimed
LineAmountTax at 53.5%
Capital gain: $900,000 sold less $500,000 cost$400,000$107,000 on the taxable half
Recapture of $40,000 claimed$40,000$21,400
Total tax$128,400

An example, not a sale. It ignores selling costs and assumes the building sells for more than it cost and all income is taxed at the top rate.

Moving in or moving out

A change in use is a deemed sale at fair market value, unless you elect otherwise. The election depends on the direction.

  • Home to rental: subsection 45(2). With the election you report no gain on the change, and you cannot claim CCA on that home.
  • Rental to home: subsection 45(3). You postpone reporting until you sell. It is not available if CCA was claimed on the property after 1984.

Both are made by a signed letter that goes with your return. They have conditions, so see an accountant before the change.

A sale within a year, worked

A $170,000 profit on a home held 11 months costs $124,950 in tax at the top rate. That is $90,950 of income tax, since the whole profit is business income, and $34,000 of BC flipping tax at 20%. The home cost $1,450,000 and sold for $1,620,000.

Held 13 months, the gain is normally a capital gain: $85,000 is taxable, which is $45,475 of tax. The BC flipping tax is then below 20% and falls to nothing at 730 days. The net proceeds calculator gives the exact figure.

Estates and non-resident sellers

Death and leaving Canada are both deemed sales. The estate reports any gain on the final return, and a transfer to a spouse can defer it.

A non-resident seller must notify the CRA and get a certificate of compliance. Without one, the buyer must remit an amount to the CRA and deduct it from the price.

Common questions about capital gains on BC real estate

  • What is the federal capital gains inclusion rate in 2026?
    50%. The proposal to raise it to two-thirds on gains above $250,000 a year for individuals, and on all gains for corporations and most trusts, was cancelled on March 21, 2025. Half of a taxable gain is added to your income for the year of sale and taxed at your marginal rate. In the top federal and BC brackets that is 26.75% of the gain. Source: Prime Minister of Canada, news release of March 21, 2025 (pm.gc.ca); CRA, Capital gains guide T4037 (canada.ca).
  • What is “recapture” and why does it matter?
    Capital cost allowance, or CCA, is depreciation you claim against rental income. When you sell the building for more than its remaining undepreciated cost, the CCA you claimed comes back as recapture, and it is added to your income in full. It is not halved like a capital gain. It also does not reduce your capital gain, which is worked from your cost. Claiming CCA moves tax from the rental years to the sale. Source: CRA, Capital gains guide T4037, definition of recapture; CRA, Rental income guide T4036 (canada.ca).
  • Are major renovations deductible against capital gain?
    Capital improvements are. Your cost includes the cost of additions and improvements, which cuts the gain when you sell. Repairs and maintenance are not part of cost. On a rental they are deducted against rental income in the year you pay them. If you are not sure which a job is, ask your accountant when the work is done, and keep the receipts. Source: CRA, Capital gains guide T4037, cost of a capital property (canada.ca).
  • I converted my rental back to my principal residence. Is that a tax event?
    Yes, unless you elect otherwise. A change in use is a deemed sale at fair market value, even though no money changes hands. When a rental becomes your home you may elect under subsection 45(3) to postpone reporting until you sell, and you can then designate it as your principal residence for up to four years before you move in. You cannot make that election if you or your spouse claimed CCA on the property after 1984. Make the election with a signed letter with your return. Source: CRA, Rental income guide T4036, Changing all your rental property to a principal residence (canada.ca).
  • What happens to capital gains when an estate inherits BC real estate?
    Death is a deemed sale of the owner’s capital property at fair market value, and the estate reports any gain on the final return. A transfer to a spouse can defer it. A home that was the owner’s principal residence for every year they owned it has no taxable gain. A rental or cottage does. Plan the will and the designation with an accountant before it is needed. Source: CRA, Capital gains guide T4037 (deemed dispositions on death); CRA, Principal residence page (canada.ca).
  • Do I owe capital gains tax on a property in my registered retirement account?
    A house or rental you own personally is reported on your own return, not inside a registered account. Whether a registered plan can hold a particular real estate investment is a question for the plan provider and your accountant. Source: CRA, Capital gains guide T4037 (canada.ca).
  • Do non-residents owe BC capital gains tax on a sale?
    Yes. A non-resident who sells taxable Canadian property, which includes BC real estate, must tell the CRA before the sale or within ten days after it. Once the CRA receives the tax or acceptable security, it issues a certificate of compliance. Without the certificate, the buyer must remit an amount to the CRA and deduct it from the price. The final tax is settled when the seller files a return. Source: CRA, Information Circular 72-17R6, Procedures concerning the disposition of taxable Canadian property by non-residents (canada.ca).
  • How does capital gains tax interact with the BC Home Flipping Tax?
    They are separate taxes and both can apply. The BC tax is 20% of net taxable income on a property held 365 days or less, falling to nothing at 730 days. The federal rule treats the gain on a home held less than 365 days as business income, with no principal residence exemption, unless a listed life event applies. Past 365 days the gain is normally a capital gain at 50% inclusion. Source: Province of BC, BC home flipping tax (gov.bc.ca); CRA, Principal residence and other real estate (canada.ca).
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Also drawn from: Canada Revenue Agency, Government of British Columbia, BC Laws.

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Last reviewed by Bronson Job PREC, REALTOR®. Licence CC BY 4.0. How we verify.

I’m Bronson Job, a REALTOR® (PREC) with Momentum Realty Inc., so I earn a commission when I help someone buy or sell. This is general information, not advice on your situation, and I take no payment from any third party named here. How I verify.