Residential property flipping rule주택 플리핑 규정 (365일 규칙)

What is it?

Buying a home and reselling it within a year is called "flipping". Since January 1, 2023, the Income Tax Act treats the profit on such a sale as business income, not as a capital gain (s. 12(12) to (14)).

This matters because only half of a capital gain is added to your income, and a home you lived in can be sheltered by the principal residence exemption (the rule that lets you sell your own home tax-free). Business income is added to your income in full, and the principal residence exemption cannot be used.

The rule also covers selling (assigning) a contract for a condo that is not built yet. The Act says a "right to acquire a housing unit" is included.

Capital gain versus business income

Your tax rate depends on your total income for the year. Adding the whole profit can push you into a higher bracket.

Which homes does it apply to?

• A housing unit located in Canada, or a right to acquire one (such as a pre-construction purchase agreement).
• You owned it (or held the right) for less than 365 consecutive days before the sale.
• It does not matter whether you lived in it. A home you lived in is still caught if sold within 365 days.
• Not covered: property that is already business inventory (for example, a builder’s or a dealer’s homes). That is business income anyway, without this rule.

The exceptions in the Act (major life events)

If the sale can reasonably be considered to happen because of, or in anticipation of, one of these events, the flipping rule does not apply even within 365 days (s. 12(13)(b)). Keep proof.

• Death of you or a related person
• A related person joining your household, or you joining a related person’s household
• Breakdown of your marriage or common-law partnership, if you have lived apart for at least 90 days before the sale
• A threat to the personal safety of you or a related person
• A serious illness or disability of you or a related person
• An eligible relocation (moving for work) of you or your spouse or common-law partner
• Involuntary termination of employment of you or your spouse or common-law partner
• Your insolvency
• Destruction or expropriation of the property (the government taking it for public use)

Even when an exception applies, the profit does not automatically become a capital gain. You go back to the ordinary rules, which depend on the facts, as if the flipping rule did not exist.

Is holding for more than 365 days safe?

Not always. The flipping rule says that less than 365 days is always business income. It does not say that 365 days or more is always a capital gain. Even before this rule, the CRA could treat profit on a home bought mainly to resell as business income, and that remains true.

A home sold just after a year, repeated buying and selling, or a quick renovate-and-sell can still be business income depending on the facts. Talk to an accountant.

Special care with pre-construction assignments

If you assign a pre-construction condo contract to someone else before completion, the Act treats it as selling a "right to acquire" a home. If you held that right for less than 365 days, the assignment profit is business income. Even after 365 days it can still be business income on the facts, as explained above.

HST can also apply to an assignment (Excise Tax Act, s. 192.1). See "HST new housing rebate".

Example

You buy a Mississauga condo on March 1, 2025 for $600,000 and sell it on December 1, 2025 (275 days later) for $680,000. Commission, legal fees, land transfer tax and other costs total $30,000, so the profit is $50,000.

Estimate for reference only. The actual tax depends on your other income, your tax bracket and the costs you can deduct. Have an accountant do the calculation.

Reporting and things to watch

• This is a federal Income Tax Act rule, so it applies across Canada, including Ontario. You report the profit as business income on your tax return for the year.
• If you sell at a loss, the loss is deemed to be nil and cannot be deducted from other income.
• To rely on an exception, keep proof (a death certificate, separation dates, a termination notice, a doctor’s letter, relocation documents, and so on).
• If you must sell within a year, talk to an accountant or tax lawyer before you sell to check whether an exception applies and how much tax to expect.