Form T2091: Designating a Principal Residence
Designating the property, the one-plus formula, home versus cottage, and the reporting requirement
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
Form T2091(IND) is where a Canadian designates a property as their principal residence when selling it, exempting the gain for the designated years. Every principal residence sale must be reported on Schedule 3 with the designation, even when fully exempt. The exemption uses the one-plus formula, and a family designates only one property per year.
On this page
The formula
| Item | Rule |
|---|---|
| Exempt portion | Gain × (1 + years designated) ÷ years owned — the "plus one" only if resident in Canada in the year of acquisition, and only years of Canadian residence count |
| One per family | One property per family unit (spouses and minor children) per year |
| Ordinarily inhabited | The property must be ordinarily inhabited by the owner or family in the year — a seasonal cottage can qualify |
| Reporting | Required on Schedule 3 and T2091 for every sale; late designation possible with a penalty of C$100 per complete month, maximum C$8,000 |
Home versus cottage
A family with a city home and a cottage (or a U.S. vacation home) designates years to the property with the larger gain per year, using the "plus one" to cover the year both are owned at a switch.
Foreign property
A U.S. vacation home can be designated as a principal residence for Canadian purposes for years the owner was resident in Canada and it was ordinarily inhabited — useful when its gain per year exceeds the Canadian home's. The United States still taxes its gain (a U.S. property sold by a non-resident is subject to U.S. tax and FIRPTA — the FIRPTA guide); the designation reduces Canadian tax but leaves less Canadian tax to credit the U.S. tax against.
Non-residents
Only years in which the owner was resident in Canada at some point count — years after the departure year don't qualify, and the "plus one" is lost entirely if the owner wasn't resident in the year of purchase — so a Canadian who keeps their home after moving to Florida has a growing taxable portion.
Frequently asked questions
Do I need to report the sale of my home if it's fully exempt?
Yes — every principal residence sale must be reported with the designation.
Can I designate a cottage instead of my home?
Yes, if it was ordinarily inhabited; choose the property with the larger gain per year.
Can a Florida condo be my principal residence for Canadian tax?
Possibly, if ordinarily inhabited — but the U.S. still taxes its gain.
What happens after I move away?
Years as a non-resident don't qualify, so part of the gain becomes taxable.
Official sources
The Canada Revenue Agency explains: “Form used by individuals to designate a property as a principal residence and to calculate the capital gain for the year.” — Canada Revenue Agency, T2091IND Designation of a Property as a Principal Residence by an Individual (Other Than a Personal Trust), https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2091ind.html
Next step
Fairlight Accounting is a cross-border accounting and tax practice with a U.S. Tax Desk and a Canadian Tax Desk. Our Canadian Tax Desk handles principal residence designations, home-versus-cottage analysis, and sales of Canadian homes after a move. See pricing or book a call.
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