How to Protect Your Tax-Free Capital Gains When Buying a Second Property

One exemption at a time: You can only designate one property per year as your principal residence, but buying a second property doesn't immediately eliminate the exemption on your first home

Section 45(2) election protects you: When converting your home to a rental, this election prevents a deemed disposition and lets you continue claiming it as your principal residence for up to 4 more years—but you must not claim depreciation (CCA) on the property

Change-of-use creates tax exposure: Without the Section 45(2) election, moving out and renting your home triggers a deemed disposition at fair market value, potentially creating a taxable capital gain even though you haven't actually sold