Selling an investment property in Toronto: what's the tax difference between closing before year-end and closing in January?
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Not the year you sign. An offer signed in December that closes in January usually counts in January's year.
Close by Dec 31, 2026 and tax is due April 30, 2027. Close in January and it goes on your 2027 return.
It stacks on top of your salary and rent. The 2024 plan to raise that share was cancelled in March 2025.
Sell sooner and the profit is generally taxed in full as business income. One family waited, and the difference ran to tens of thousands.
- 01Weigh the mortgage penalty against carrying costs
- 02Lawyers and banks run thin over the holidays
- 03Closing in 2026? List in the fall
- 01Have your accountant run both dates
- 02Gather purchase, improvement and selling receipts
- 03Count days since it was registered to you
- 04Non-resident? Ask about the clearance certificate
- 05Lock the closing date, then sign
Tell Yifei whose name it is in, how long you have owned it and where your income is heading. He will tell you straight, and your accountant confirms the tax.
Ask YifeiWhy one closing date can shift your tax by a year
For an individual, profit on an investment property is a capital gain, and right now half of it is added to your income for the year, on top of your salary and rental income. (A 2024 proposal to raise that share was cancelled in March 2025.) So the closing date changes two things:
- When you pay: a December closing means tax due in a few months. A January closing pushes it back about a year.
- How much you pay: the same gain can cost less if it lands in a year when your other income is lower.
Which situation are you in
In one family Yifei worked with, a property in the daughter's name was a little short of one year of ownership. The decision was to wait until it got there; the tax difference ran to tens of thousands of dollars. Counting your days of ownership matters more than a few days either side of New Year's.
Other things the closing date affects
- Mortgage penalty: on one deal the other side's mortgage term didn't end until after New Year's, so they wanted to close later to avoid a penalty. Yifei walked them through it: closing a month earlier made little difference in interest and saved over a thousand dollars in property tax, utilities and internet. Put the penalty next to the carrying costs and compare.
- Holidays: between Christmas and New Year's, law offices and banks are short-staffed or closed. To close in 2026, aim for mid-December.
- Buyers: in Yifei's experience the slowest stretch of the year is December 20 to January 20, and there's still a wave of buyers before December 20. To close before year-end, you'd roughly list in the fall, take offers around November and close before Christmas.
What to do
- Before you sign, give your accountant both closing-date scenarios and have them run each against your income for both years.
- Gather your purchase price, the legal fees and other costs you paid when you bought, invoices for additions and improvements (routine repairs generally don't count), and selling costs like commission and legal fees. Missing receipts mean a bigger taxable gain.
- Check the exact date the property was registered in your name and count your days of ownership.
- If you don't live in Canada or your tax residency has changed, ask your accountant about the clearance certificate. Without it, the buyer's lawyer will hold back part of the proceeds.
- Settle the closing date before you sign. To move it later, you need the other side's agreement.
Recently Yifei sat down with his accountant and went through the rental records, renovation receipts and clearance questions on his own investment properties, line by line. Yifei's view: do this math before you sign the offer, not after you close.
Ask about your own situation
Whose name the property is in, how long you've owned it and where your income is heading decide which closing date works better. Tell me about your situation (Yifei, RE/MAX, efay.ai) and I'll tell you straight what I'd do. For the tax numbers, I'll ask you to confirm them with your accountant.
Frequently asked questions
Does the tax year follow the offer date or the closing date?
Generally the closing date, when ownership passes to the buyer. An offer signed in December that closes in January usually counts in January's year. Confirm with your accountant.
Does this apply when I sell my own home?
If it was always your home and qualifies for the principal residence exemption, you usually don't pay capital gains tax, but you still report the sale and designate it as your principal residence. If you rented it out, the exemption may cover only the years you lived there, and in some cases an election can help. A home owned by a corporation generally can't use the principal residence exemption. Have your accountant look at your case.
If I close before year-end, when do I pay?
For a 2026 closing, file and pay by April 30, 2027. If you or your spouse are self-employed, filing can wait until June 15, but any balance is still due April 30. If your net tax owing is over $3,000 this year and in either of the two previous years, CRA may ask for instalments.
Sources
- Canada Revenue Agency, Guide T4037 Capital Gains: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037/capital-gains.html
- Prime Minister of Canada, cancellation of the proposed capital gains inclusion rate increase (March 21, 2025): https://www.pm.gc.ca/en/news/news-releases/2025/03/21/prime-minister-mark-carney-cancels-proposed-capital-gains-tax-increase
- Canada Revenue Agency, Guide T4036 Rental Income: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4036/rental-income.html
- Canada Revenue Agency, Disposing of or acquiring certain Canadian property: https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/disposing-acquiring-certain-canadian-property.html
- Canada Revenue Agency, Due dates and payment dates for individuals: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/important-dates-individuals.html
- Canada Revenue Agency, Who has to pay instalments: https://www.canada.ca/en/revenue-agency/services/payments/payments-cra/individual-payments/income-tax-instalments/who-pays-instalments.html