Issue of a Capital Gains Tax: Sale of Owner-Occupied Houses in Canada

Issue of a Capital Gains Tax on the Sale of Owner-Occupied Houses in Canada
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Issue of a Capital Gains Tax on the Sale of Owner-Occupied Houses in Canada
Introduction
Owner-occupied houses are considered capital assets, which must be subjected to capital gains tax. In Canada, the Carter Commission recommended the exemption of a capital gains tax on the sale of a principal residence to encourage Canadians to realize their dreams of homeownership. That implies that Canadians who use their homes as private residences may defer the taxation of unrealized gains until the time of deemed deposition (Cestnick, 2021). At the same level, the U.S. allows for deducting mortgage interest payments and property taxes from taxable income. Regardless, the rapid increase in house prices and tax reforms calls for a capital gains tax exemption to remedy.
Economic arguments favoring capital gains tax exemption
Many Canadians count on the value of the principal residence to finance their retirement plans, meaning affordability is essential to sustain ease in buying properties. For Canadian homeowners, tax exemption for principal residences lowered the costs of relocating from one owner-occupied home property to another, maintaining the concept of affordability. In other words, capital gains tax protection gave Canadians the opportunity to achieve their dreams of homeownership as property owners opt for sales options rather than holding assets. For the Canadian government, exemption on the capital gains tax promotes property affordability and improves Canadian citizens' financial health and balance sheet. Furthermore, the exemption was available to offset capital gains realized throughout the property's lifetime. That said, Canadian homeowners could use the capital gains tax exemption as an opportunity to raise capital to start businesses that would promote the Canadian economy. 
 In most situations, the exemption encourages most Canadians to buy and sell their homes freely without worrying about the potential effects income tax may have on the profits realized from a home's sales (Kathrada, 2020). That implies that capital gains tax exemption is vital for achieving a less volatile housing market with applicable standard prices. Indeed, the capital gains tax exemption favors homeowners relative to renters because it helps to create equality between homeowners with different job circumstances. However, when homeowners change the status of their property from personal use to income-producing, a capital gains tax is imposed when the current market value of the property exceeds the taxpayer's costs.  
Economic arguments against capital gains tax exemption
Sometimes, the government can tighten the rules of claiming exemption on sales of principal homes and create new regulations needing taxpayers to report the disposition of the principal property. Those who oppose exemption on capital gains upon the sale of owner-occupied houses claim that even though the exemption makes the housing market lucrative, it has fostered a highly volatile market with varyingly higher prices. They argue that house prices continue to rise as the exemption will i...