I read your recent column about title insurance, which I purchased when I bought my home years ago. The value of my property has probably increased 2 to 3 times. Should I get new title insurance, or will my policy account for the new value? – PLAYING IT SAFE
DEAR SAFE: Thankfully, this is the one time you don’t have to worry about increasing the coverage on an insurance policy. Title insurance is a one-time purchase that lasts as long as you own the home for which it was bought (regardless of the value of the property). You can rest easy in the knowledge that your property title is protected from potential losses for as long as you own your home.
(Note from David) This week, we received a number of questions about the capital gains implications of a quick sale. Here are two perspectives:
I heard there was a bylaw about flipping houses and having to wait a year before you can resell them. Any insight? – THINKING OF INVESTING
DEAR THINKING: There is no minimum time limit for owning a house. But flipping a house you are not living in is a business, and as such, Revenue Canada will expect its share of the proceeds.
In order to receive capital gains (the profit from the sale of your property) tax free, the property must qualify as your primary residence – which means you must live in it. As your primary residence, its gains are usually received tax free (though this is not the case for other properties you may own; you can only have one primary residence).
With the passing of Bill C-63 at the start of the 2016 tax year, taxpayers were required to report certain basic details about the sale of a principal residence in order to claim the full capital gains exemption. Prior to that, some flippers were able to fly under the radar.
I bought my house 2 months ago, intending it to be my principal residence. Circumstances have changed and I now need to sell. Can I sell it right away? I was told I might have to pay taxes on the gains if I sell before 6 months. – IN A BIND
DEAR BIND: If a house turns over this quickly and makes a profit, it may send up a red flag when you file your taxes next year. The Canada Revenue Agency (CRA) may look for signs you intended to “flip” the home. If this is a new build and you waited awhile to take possession, or if you completed major updates in the last 8 weeks, it may raise some questions.
You mentioned the home was purchased as a principal residence. As such, it shouldn’t be a concern if you make money. Unfortunately, I don’t imagine the value will have increased much in this short a period of time, unless it was a new build. Bottom line, get your ducks in a row as to the reason for your move, in case the CRA asks.