Why Timing Matters in Real Estate Closings

As the year draws to a close, many buyers and sellers rush to finalize transactions before December 31st.
While closing before year-end can be beneficial, it’s important to understand the tax implications that come with the timing of your sale or purchase. Whether you’re looking to optimize your return, reduce your tax liability, or plan ahead for next year’s filings, knowing how the rules apply can help you make more informed financial decisions.

💰 Selling Before Year-End: What You Should Know

If you’re selling a property before December 31st, your sale may be taxable in the current calendar year, depending on the type of property and your residency status.

1. Principal Residence Exemption (PRE)

If the home you’re selling has been your principal residence for every year you owned it, you can typically claim the full capital gains exemption — meaning no taxes are owed on the profit.
However, if the property was used as a rental or secondary home for part of the ownership period, a portion of your gain may be taxable.

✅ Tip: Always report the sale of your principal residence on your tax return, even if it’s fully exempt.

2. Investment or Secondary Properties

For rental or investment properties, the capital gain (the difference between your selling price and adjusted cost base) is taxable at 50% of the profit.
If you sell before year-end, that gain is included in your 2025 income. Some sellers strategically delay closing into January to shift the tax event into the next tax year.

💡 Example:
If you sell an investment condo on December 15, 2025, your gain will be included in your 2025 tax filing.
If the closing date is January 10, 2026, the gain applies to your 2026 tax year instead.

3. Expenses That Reduce Taxable Gain

Don’t overlook deductible expenses, such as:

• Legal and real estate fees
  
  
• Advertising and staging costs
  
  
• Renovations made to increase value before sale
  
  
• Mortgage penalties paid at closing
  
  

These can reduce your adjusted cost base (ACB) and ultimately lower your taxable profit.

🏡 Buying Before Year-End: Smart Tax Considerations

If you’re purchasing a home before December 31st, there are a few financial planning benefits to consider:

1. Property Tax Adjustments

At closing, you’ll reimburse the seller for any prepaid property taxes. This portion is deductible if the home is used for rental or business purposes. For principal residences, it simply affects your annual tax payment schedule.

2. Land Transfer Tax (LTT)

If you buy in December, your Ontario Land Transfer Tax and potential Toronto LTT are payable at closing.
You may qualify for the First-Time Home Buyer Rebate, which can refund up to $4,000 provincially and up to $4,475 in Toronto.

3. FHSA and RRSP Contributions

If you’re planning to buy, don’t forget that contributions to your First Home Savings Account (FHSA) or RRSP (for the Home Buyers’ Plan) made before year-end can reduce your taxable income for 2025 — giving you an immediate financial advantage.

🧾 Important Year-End Reminders

• Document everything: Keep digital and printed records of closing statements, invoices, and receipts.
  
  
• Work with your accountant early: They can help you project your potential tax liability and identify deductible opportunities.
  
  
• Watch your closing date: Even a few days’ difference can change the tax year your sale or purchase is recorded.
  
  

💼 Partner with a Team That Understands the Financial Side of Real Estate

At Ana Bastas Realty, we go beyond transactions — we help you understand the financial and strategic implications of every move. Whether you’re buying your first home, investing, or selling before year-end, our team works alongside your accountant and lawyer to ensure every decision supports your long-term goals.

If you’re considering a move before December 31st, now is the time to connect. We’ll review your situation, outline your options, and help you plan a smooth and financially sound closing.