What You Need to Know About the CRA's Property Flipping Rule

You might think flipping a property in under a year is no big deal — but CRA sees it differently.

Since January 1, 2023, there's been a federal rule in place: if you sell a residential property within 365 days of buying it, the Canada Revenue Agency (CRA) will automatically treat the profit as business income — not a capital gain. That means:

• You pay tax on the full profit at your marginal rate

• You can’t use the principal residence exemption to shelter the gain

And here’s the kicker — if you sold at a loss, you can’t claim it.

A recent Globe and Mail article by Tim Cestnick tells the story of a friend who sold two condos within a year. One earned him a $75,000 profit; the other was a $50,000 loss. The CRA taxed him fully on the profit and ignored the loss — under the flipping rules, that loss is treated as zero. Painful.

Let’s break this down with an example.

You buy Condo A for $500,000
Six months later, you sell it for $450,000 → $50K loss

You also sell Condo B for a $50K profit within 365 days

You’d think the loss could cancel out the profit, right?
Nope.

Under CRA’s flipping rule:

• Your $50,000 profit is fully taxable as business income

• Your $50,000 loss is treated as zero — you can’t claim it

So you’re paying tax on money you didn’t really net.

Can I deduct renovation and selling costs?

If you sold for a profit, yes — you can deduct legitimate business expenses to reduce that taxable profit.

Let’s say:

• You buy for $500,000

• Sell for $600,000 within a year

• Spend $75,000 on renovations, staging, and Realtor fees

Your taxable profit =
$600,000 – $500,000 – $75,000 = $25,000

That $25K would be considered business income, and that’s what you’d pay tax on. But make sure you track everything — receipts, invoices, contracts — the CRA will want proof.

So what should you watch out for?

• The 365-day clock starts on the date you take title, not when you list or sell

• These rules apply even if you never intended to flip — life happens, but CRA isn’t always flexible

• Losses on flips can’t be claimed, but expenses tied to profits can

If you're unsure whether a property you're selling falls under these rules, or you’re planning to sell within the year, talk to your accountant or reach out to us. The tax hit can be a surprise if you're not prepared — and we’d rather help you plan ahead than sort out a mess later.