In most cases you do not pay tax when you sell the home you lived in, because the principal residence exemption covers the capital gain for every year the property was your principal residence. But in Quebec the exemption is not automatic: you must report the sale and designate the property on both your Quebec and federal returns for the year of sale, or face penalties. Years when the home was rented, a second property, or a sale within a year of buying can leave part of the gain taxable.
Updated for 2026
Official sources
- Revenu Québec: Selling Your Property (House or Residential Complex)
- Canada Revenue Agency: T4037 Capital Gains
- Canada Revenue Agency: Principal residence and other real estate
This article explains how the exemption works for Quebec homeowners, the forms involved, and the situations where sellers get caught. It is general information, not tax advice. An accountant or tax professional should review your own file before you sell.
What is the principal residence exemption?
When you sell a property for more than you paid, the difference is a capital gain. Revenu Québec states that, in general, half (50%) of a capital gain on the sale of your house is taxable, and that designating the property as your principal residence lets you avoid tax on all or part of that gain (Revenu Québec). Quebec follows the same basic rules as the federal government, so the exemption normally applies on both returns.
Which property qualifies as a principal residence?
A house, condo, cottage or unit in a duplex or triplex can qualify if you, your spouse or common-law partner, or your child lived in it at some time during the year, and you designate it (CRA, Principal residence). For 1982 and later years, you can designate only one home as your family’s principal residence for each year (CRA). If you own a house in Pointe-Claire and a cottage in the Laurentians, you choose which one to designate for each year, usually the one with the larger gain per year, and the other is taxable for those years.
The CRA says the land under and around the home is usually limited to half a hectare (1.24 acres), unless you can show you need more to use and enjoy the home, for example because of a municipal minimum lot size (CRA).
Do I have to report the sale if no tax is owed?
Yes. This is where Quebec sellers most often go wrong.
- Quebec: complete form TP-274-V, Designation of Property as a Principal Residence, and check box 109 in Part F of Schedule G, then file them with your return for the year of sale. Revenu Québec warns that failing to send TP-274-V can bring a penalty of $100 per month, up to $5,000.
- Federal: report the sale on Schedule 3 and designate the property on form T2091(IND). Since 2016, the CRA allows the exemption only if you report the sale and designation; if you forget, ask the CRA to amend your return; it may accept a late designation in certain circumstances (CRA), with a penalty of $100 for each complete month late, up to $8,000 (CRA IC07-1, para. 51). Only page 1 of T2091(IND) is needed if the home was your principal residence for every year you owned it, or every year but one (CRA).
Your notary will not file these for you. Put a reminder in your tax folder the day you sign the deed.
How is the exempt part calculated?
The CRA’s formula, set out in its Income Tax Folio S1-F3-C2, reduces the gain by gain × (B ÷ C), where B is 1 + the years designated while resident in Canada and C is the years owned (CRA Folio S1-F3-C2, ¶2.20). Put simply, the exempt portion of the gain is (1 + the number of years designated as principal residence) ÷ the number of years you owned the property, multiplied by the gain. The “plus one” treats both homes as a principal residence in the year you sell one and buy another, even though only one can be designated for that year; it applies only if you were resident in Canada in the year you acquired the home (Folio ¶2.20, ¶2.28; CRA). If you designate every year you owned the home, the full gain is exempt.
Example: you owned a Dollard-des-Ormeaux house for 10 years and designate all 10 years. The formula gives (1 + 10) ÷ 10, which is more than 100%, so the whole gain is exempt. If you rented it out for 4 of those years and designate only 6, then (1 + 6) ÷ 10 = 70% of the gain is exempt, and the rest is a capital gain, half of which is taxable.
When does selling a home in Quebec trigger tax anyway?
You sold within 365 days
Since 2023, if you sell a residential property you owned for fewer than 365 consecutive days, the gain is generally treated as business income, not a capital gain, and the principal residence exemption does not apply, unless the sale is due to, or in anticipation of, a listed life event: death of you or a related person; a related person joining your household (for example a birth or caring for a parent); a relationship breakdown after at least 90 days living apart; a threat to personal safety; serious disability or illness; an eligible work or school relocation that brings your new home at least 40 km closer; involuntary loss of employment; insolvency; or destruction or expropriation of the home (CRA, Flipped property; CRA, Completing Schedule 3). A loss on a flipped property is deemed to be nil. Revenu Québec applies the same 365-day rule (Revenu Québec). If life forces a quick sale, keep evidence of the event.
Part of the home was rented
Renting a basement apartment or one unit of a duplex can change the calculation. The CRA treats the whole property as your principal residence if the income use is ancillary to the main residential use, there is no structural change, and no capital cost allowance is claimed (CRA). Otherwise you split the price and cost between the two uses, by square metres or number of rooms, as long as the split is reasonable (CRA). A separate unit in a plex is usually treated as a separate rental property, and only your own unit is covered.
You changed the use of the property
Turning your home into a rental, or a rental into your home, is a “change in use” that can create a deemed sale. If you move out and rent the whole home, an election under subsection 45(2) of the Income Tax Act lets you keep designating it for up to four years, provided you claim no capital cost allowance and designate no other home (CRA). Talk to an accountant before you move out and rent the home.
A second property or an estate
A cottage, a condo for a child, or a home inherited from a parent may not qualify for the years you or your family did not live in it. An estate has its own rules; our estate property checklist covers the real estate steps.
Checklist before you sell
- Gather your purchase deed and invoices for capital improvements, which can increase the cost base of a property that is partly taxable.
- List every year you owned the home and whether you lived in it, rented any part, or owned another residence.
- Ask your accountant whether you need TP-274-V and T2091(IND) and whether any portion is taxable.
- Estimate your net proceeds after commission, mortgage penalty and adjustments. Our closing costs guide and home value guide help, or request a home valuation.
Frequently asked questions
Not on the years the home was your designated principal residence, in most cases. You must still report the sale on both returns.
Revenu Québec states the penalty can be $100 per month, up to $5,000. File it with your return for the year of sale.
Not for the same years from 1982 on. A family, meaning you, your spouse or common-law partner (unless legally separated for the whole year) and your children under 18 without a spouse or partner, can designate only one home per year (CRA).
The unit you live in usually is. The rented unit is usually treated as a rental property, so a portion of the gain may be taxable.
Thinking about selling in Montreal or the West Island? Contact our team for a pricing conversation, and loop in your accountant early.
About the author: Logan Boyce, real estate broker, licence E9010, eXp Agence Immobilière. Logan is team leader of Montreal’s Elite Real Estate Group. His team coordinates property sales with liquidators, families, notaries, inspectors, lenders, insurers and other specialists while keeping professional roles clearly defined.