When a principal residence is sold, the gain is not taxable if it has been the person's principal residence for the whole time it has been owned. This is because the principal residence exemption eliminates the capital gain. In years prior to 2016, there was no need to report the sale on your tax return if the entire gain was eliminated. However, on October 3, 2016 the federal government announced that, starting with the 2016 tax year, the sale of a principal residence must be reported on Schedule 3 of the tax return, in order to claim the principal residence exemption. This change applies also for deemed dispositions, such as a deemed disposition due to change in use of the property.