Renting your home – election to avoid deemed disposition
When you start renting your personal use property, change in use occurs from principle property to rental. Generally, you lose the principle residence status that shelters the gain at the year of sale. However, there is a special election that you can make to have the change in use not to occur.
When you change your principal residence to a rental property, you can make an election not to be considered as having started to use your principal residence as a rental property. This means you do not have to report any capital gain when you change its use. If you make this election:
• you have to report the net rental income you earn
• you cannot claim CCA on the property
While your election is in effect, you can designate the property as your principal residence for up to FOUR years, even if you do not use your property as your principal residence. You can only do this if you do not designate any other property as your principal residence for that same time period.
You can extend the four-year limit for an unlimited time if certain conditions are met.
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