Changes to the 'Plus One' rule and reporting
requirements for principal residence exemption
Last year, the federal government altered the rules for the
principal residence exemption (PRE) by closing some loopholes
surrounding the capital gains exemption as they relate to the sale
of your home as well as making changes related to ownership of a
principal residence by a trust. I detailed these in the previous articles in this series. But the
feds aren't quite done with you yet. There are changes to the
so-called "Plus One" rule as well as to reporting
requirements.
Changes to the "Plus One" rule
To re-cap, eligibility for the principal residence exemption is
on a year-by-year basis, which might come as a surprise. The more
years you qualify relative to your total period of ownership, the
more your gain gets reduced. To be more precise, here is the basic
formula that normally applies:
