When you change how you use a property, it's considered a deemed disposition for tax purposes. This means:

• You're considered to have sold the property at its fair market value
• You've immediately reacquired it for the same amount
• This may result in a capital gain

Key points:

• When reporting the sale of your principal residence, you don't pay tax on any gain for the years it was your primary home
• You only report gains for years when it wasn't your principal residence

Exceptions to change in use rules:

1. Changing your principal residence to a rental or business property

   • You can file an election 45(2) to defer the capital gain
   • You must report rental or business income
   • You can't claim capital cost allowance (CCA)
   • You can designate it as your principal residence for up to 4 years under certain conditions

2. Changing a rental or business property to your principal residence

   • You can file an election 45(3) to defer the gain
   • You can designate it as your principal residence for up to 4 years before occupying it, with conditions
   • Restrictions apply if CCA was claimed on the property

3. Changing part of your principal residence to a rental or business property (or vice versa)

   • Only report the change for the part of the property affected
   • The entire property may still be considered a principal residence under specific conditions

How to make an election in Wealthsimple Tax:

1. Add the File an Election section and check the box indicating you're filing an election

2. Prepare your election document:

   • Get a current copy of the special election form
   • Complete the form with your details and the election specifics

3. Submit the election to the CRA:

   • Sign in to your CRA My Account or mail them to your tax centre
   • Select "Submit documents"
   • If you have a case or reference number, enter it
   • If not, select "Special Elections and Returns (SERs)" or "Submit Docs related to SERS" from the topic list
   • Follow the instructions to attach your completed election form

4. Keep a copy of the submitted election form for your records

If you have questions about reporting property changes for tax purposes, consider consulting with a tax expert. If you need assistance entering this information in Wealthsimple Tax, please contact Wealthsimple support.