Your home is NOT an asset!
Most people think their home is an asset. I don't agree. My definition of an asset is something that puts cashflow in your pocket. ie. revenue property or a positive cashflow business . Your personal residence only costs you money ie. taxes, mortgage, maintenace etc. Just ask people who bought at the height of the boom, and are now upside down, what they think of their supposed asset today. Liabilities are things that cost you $$$$. There are good and bad liabilities. I do believe your home is a good liability, because we need to live somewhere and there is a possibility of capital gains at some point. But it is still a liability. On the other hand a new porsche in the driveway and a 60" home theatre system are great examples of bad liabilities. These items will only depreciate in value and never produce any type of cashflow. Unless of course you are a professional racer or charge admittance for movie nights at your place.
Last edited by mario8579; 01-18-2012 at 12:54 AM.
If you time your sales and purchases of real estate, serious money can be made with zero tax due to principal residence exemptions.
When a principal residence is sold, the gain is not taxable if it has been the person's principal residence for the whole time it has been owned. This is because the principal residence exemption eliminates the capital gain. In this case, there is no need to report the sale on your tax return.
A taxpayer and spouse may only designate one principal residence between them for each tax year after 1981. For years prior to 1982, each individual taxpayer can designate one principal residence, so if a couple has owned both a primary home and a cottage for decades, the principal residence exemption is available for both homes for the years prior to 1982.
If a home has been owned since before 1972, only the increase in value since December 31, 1971 is used to calculate the gain before deducting the principal residence exemption.
More on this article can be read @ http://bit.ly/GWXP4j Tax Tips.ca