How to Avoid Capital Gains Tax on Rental Property in Canada?

In Canada, capital gains tax is a tax on the profit made when an asset is sold. If you sell a rental property for more than you paid for it, you will be taxed on any profits. However, there are ways to avoid paying this tax, such as by claiming the principal residence exemption or carrying forward capital losses from previous years. You can also defer the sale and repurchase of the property, transfer ownership to a spouse or common-law partner, designate gifted and inherited property as a principal residence, or incorporate your rental property business. To qualify for the principal residence exemption, you must have lived in the house for at least one year before selling it, and it must be your primary residence. There are also exemptions if you transfer ownership to a spouse or if you designate gifted or inherited property as your principal residence.