Real Estate Tax Services in Canada

Canadian real estate tax — the rules keep changing

Canadian real estate taxation has seen more legislative and CRA administrative change in the last five years than in the previous twenty: new anti-flipping rules treating residential property sold within 365 days as business income; the Underused Housing Tax (UHT) requiring annual filings from many residential property owners; the principal residence exemption requiring Form T2091 reporting even when fully exempt; tightened scrutiny on pre-construction assignment sales; new GST/HST New Housing Rebate documentation requirements; and provincial overlays including the BC speculation and vacancy tax, BC foreign buyers’ tax, Ontario non-resident speculation tax, and Toronto Vacant Home Tax.

Real estate is also the area of Canadian tax where the same transaction can be characterized as a capital gain (50% inclusion rate), business income (100% taxable), or fully exempt under the principal residence exemption — with the outcome determined by a fact-based analysis that the taxpayer must be ready to defend. The cost of getting it wrong is significant.

Who we serve

• Individual real estate investors with one to many rental properties
• Multi-property landlords and Canadian corporations holding real estate
• Flippers and developers generating business income on real estate inventory
• Realtors, mortgage brokers, and other real estate professionals as personal taxpayers
• Pre-construction assignment sellers dealing with HST and business-income characterization
• Owners of US property with cross-border filing implications
• Snowbirds renting out their primary Canadian home while away
• Couples and families restructuring property ownership for tax efficiency

What we deliver

• T776 Statement of Real Estate Rentals for each rental property, with proper expense classification, CCA analysis, and per-property profit/loss reporting
• Capital gains vs business income determination using CRA’s factors (intention, length of ownership, frequency of transactions, nature of work performed, financing structure)
• Principal residence exemption claims and Form T2091 documentation for the year of sale
• Section 45(2) and section 45(3) elections on change of use between principal residence and rental property
• HST New Housing Rebate (GST190 / RC7190) for buyers of newly built or substantially renovated principal residences
• HST New Residential Rental Property Rebate (GST524 / RC7524) for buyers of new residential rental property
• Underused Housing Tax (UHT-2900) returns for affected owners
• BC Speculation and Vacancy Tax, BC Foreign Buyers’ Tax, Ontario Non-Resident Speculation Tax compliance
• Capital cost allowance (CCA) Class 1 building depreciation analysis — including the trade-off between current tax savings and future recapture on disposition
• Bare trust analysis for nominee/legal title arrangements
• Family-trust and holding-company real estate structures

The 2023 anti-flipping rule

Effective January 1, 2023, residential real estate sold within 365 days of acquisition is automatically treated as business income (100% taxable) rather than capital gain (50% inclusion) — unless one of the enumerated life-event exceptions applies (death, household addition, breakdown of marriage, threat to personal safety, serious illness, eligible relocation, involuntary termination of employment, insolvency, or destruction of the property). The seller must affirmatively claim the life-event exception. Without it, the entire gain is fully taxable as ordinary business income, with no principal residence exemption available either.

The Underused Housing Tax (UHT)

The UHT is a 1% federal tax on the value of underused residential property owned by non-resident, non-Canadian persons — but the filing obligation reaches further than the tax obligation. Many Canadian-resident corporations, partnerships, and trusts holding residential property are required to file an annual UHT-2900 return even when no tax is owing. Penalties for failing to file start at $5,000 for individuals and $10,000 for corporations per property per year. We file UHT returns for affected clients annually.

Principal residence exemption — not automatic

Since 2016, every sale of a principal residence must be reported on Schedule 3 and Form T2091, even when fully exempt from tax. Failing to report a principal residence sale can disqualify the exemption and trigger CRA penalties. We document the principal residence designation carefully, especially for taxpayers who own more than one property during the same year (cottage owners, transitional periods between homes).

Frequently asked questions

What Canadian businesses commonly miss about this service

Across the hundreds of Canadian businesses we work with, the same handful of issues come up repeatedly. Many small business owners delay engaging professional accounting until a crisis: a CRA review letter, an unfiled GST/HST return demand, a denied bank loan because financial statements aren't ready, or a Notice of Reassessment that arrived weeks ago. By the time we are first contacted, the cost to fix the problem is often several times what proper ongoing accounting would have cost from the start. Proactive engagement is dramatically cheaper than reactive cleanup.

The Canadian tax landscape also changes constantly. Recent changes that affect most Canadian taxpayers include the 2023 anti-flipping rule (residential real estate sold within 365 days is automatically business income, not capital gain); the Underused Housing Tax (UHT-2900 annual filing requirement for many corporations, partnerships, and trusts holding residential property even when no tax is owing — with $5,000 to $10,000 per-property failure-to-file penalties); the Quebec QST joint registration changes since 2021; the post-2018 Tax on Split Income (TOSI) rules that effectively eliminated casual income splitting through family dividends; the post-2021 $200,000 stock option vesting limit on the 50% deduction for options granted by non-CCPCs; the CSRS 4200 Compilation Engagement standard replacing the older Notice to Reader engagement; and ongoing CRA increased scrutiny on pre-construction assignments, short-term rental businesses, and cash businesses.

How BOMCAS Canada delivers this service

Every engagement begins with a written, fixed-fee engagement letter signed before any work is performed. The engagement letter describes exactly what is in scope, what deliverables you will receive, when those deliverables are due, what your monthly or project fee is, and what (if anything) is outside scope. This eliminates the hourly-billing surprise that most accounting clients fear. The only time we use hourly billing is for genuinely unpredictable items such as CRA audit response or complex one-off projects — and even then we agree to a maximum cap before starting.

Once the engagement letter is signed, you e-sign the CRA authorization (RC59 for businesses or AUT-01 for individuals), and we onboard you to the encrypted client portal with multi-factor authentication. All document exchange flows through the portal — no emailing of sensitive financial documents. Meetings happen by video conference or phone at times that work for you, including outside normal business hours when needed.

Our Canadian tax compliance philosophy

BOMCAS Canada is structured around four operating principles:

1. Tell the truth. If a tax position is aggressive, we say so. If a deduction will not survive a CRA review, we say so. If the engagement is going to cost more than originally quoted because the scope changed, we say so before doing the work.
2. Bill what we said we would bill. No surprise invoices. No scope-creep billing. If something legitimately changes scope, we discuss it and re-quote before doing the additional work.
3. Answer the phone. One-business-day response standard on client communications during normal business hours. No voicemail backlogs.
4. Specialize. Canadian tax and accounting is too complex to be a generalist. We do not do US-only tax, UK tax, or any other foreign jurisdiction in isolation. We are Canadian. Our cross-border work is always anchored by deep Canadian compliance.

What ongoing engagement with BOMCAS Canada looks like

For most clients, the ongoing relationship is structured around predictable monthly deliverables. For an incorporated small business client, that typically includes: monthly cloud bookkeeping with full bank and credit card reconciliation; quarterly or annual GST/HST returns prepared and filed; monthly payroll for owner-managers and any employees, with CRA source deduction remittances; year-end Compilation Engagement (CSRS 4200) financial statements; T2 corporate income tax return; owner-manager T1 personal tax return (and spouse where applicable); annual salary-vs-dividend optimization with written recommendation; unlimited email and phone support during business hours; one quarterly check-in call to review numbers and discuss the business; and CRA correspondence handling for routine review letters.

For a personal tax client, the ongoing engagement includes: annual T1 preparation; any required Quebec TP-1 (for Quebec residents); CRA pre-assessment and post-assessment review response when CRA requests additional documentation; Notice of Assessment reconciliation; and proactive tax planning conversations during the year about RRSP, TFSA, and FHSA contributions, major life events (marriage, kids, retirement, real estate), and any planned business or investment changes.

Frequently asked questions about engaging BOMCAS Canada

Why Canadian businesses choose specialized accounting over generalist accounting

The Canadian tax and accounting landscape has become significantly more complex over the past decade. The 2018 TOSI rules, the 2021 changes to stock option taxation, the 2022 mandatory reporting changes for trusts, the 2023 anti-flipping rule, the Underused Housing Tax, the changes to the small business deduction phase-out for passive investment income, the new CSRS 4200 Compilation Engagement standard, the continued expansion of digital sales tax rules, and the ongoing post-COVID CRA focus on cash businesses and unreported income have all required accountants to specialize more deeply. A generalist firm trying to cover personal tax, corporate tax, US tax, real estate, trusts, cross-border, and every industry vertical inevitably falls behind on the depth of expertise that any one client needs.

BOMCAS Canada is structured deliberately to maintain depth: we are Canadian-only by design; we work in industries where we have genuine specialized experience; we maintain ongoing professional education in Canadian tax law; we use Canadian-experienced staff at every level; and we coordinate with specialized partners (US-licensed cross-border, legal counsel for corporate restructuring, audit-engagement licensed practitioners) where required rather than trying to handle everything in-house.

Talk to a Canadian accountant

Call 780-667-5250 or submit the contact form. We respond within one business day and provide a fixed written quote before any work begins.

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