Change from primary residence to rental with or without appraisal?

[Darkadder]

Hi there, We bought and have been living in our current condo for about 8 yrs now. Our family is growing and we're planning on maybe moving  out but that's undecided as we really love the city, it's convenience and don't really want to sell our condo but continue to  live in it.  We thought of perhaps renting a home away from the city for a few years just to see how it would feel, and rent out our principal residence (condo) in the  interim.  Maybe return back to the condo in a few years if things don't go as planned. Or if things do work out, then sell the condo after renting it out for a few years.
How is this going to work out? Can we appraise the property at its current market value and then rent it out?  So that when we sell it in the future, we can sell it at below market value (if need be but above appraised value) so that the  capital gains are less? In short, we don't want to forfeit the capital gains exemption on a principal residence if we sell it in  the future. What are our options? Any advice or direction would be much appreciated.

[TurboTaxMonica2 · Accepted solution]

The CRA actually has an election that would be applicable to your situation. Information may be found here:

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-re...

In general, this is considered a "change in use" of your principal residence situation. You are allowed make an election to have your condo continue to be considered your principal residence for up to four years. There are other conditions to be met if you want to go beyond the four years. All the info is outline in the above link.

As an aside, regardless of the election, it may still be worthwhile to get your property appraised for fair market value when you move out of your condo. You just never know what will happen in the future, so it is worth having this information on hand in case you change your mind or your situation changes and you now need to report a "disposition".

[Darkadder]

Thank You Monica...appreciate your time.