My Mexican condo cost $75,000 USD. The Canadian dollar was weak when I bought — the CAD equivalent was $103,000. Do I file T1135?

Yes — T1135 is required. The $100,000 threshold for T1135 is measured in Canadian dollars using the Bank of Canada exchange rate on the date of purchase. If the USD/CAD rate at the time of your purchase converted your $75,000 USD to more than $100,000 CAD, your adjusted cost base in CAD exceeds the threshold, and T1135 is required regardless of whether you rent the property. The exchange rate used is the Bank of Canada closing rate on the purchase date (or the noon rate for older transactions). This is a common surprise for Canadians who think in USD — the CAD calculation at the time of purchase controls, and a weak CAD period can push a USD $75,000–$85,000 property over the threshold.

I let my family member stay in my Mexican property for two weeks and charged them a nominal amount. Does that count as rental?

Almost certainly yes. The personal-use exemption requires exclusive personal use — meaning use only by you (and arguably your immediate family without any payment). Charging any amount — even $1 — to a family member converts the use to a commercial rental for that period, removing the personal-use exemption for the year. Even below-market or nominal rent counts as rental income in CRA's view. There is a concept of 'personal-use property' versus 'rental property' in the Income Tax Act, but for T1135 purposes, the distinction hinges on whether the property is exclusively for personal use. CRA's position is that any commercial rental, even minimal, removes the exemption. If family members stay for free (no payment exchanged) and the property is otherwise used personally by you, the exemption is more defensible — but any payment changes the analysis.

I haven't filed T1135 for the past four years but my property is personal use only and under $100K CAD cost. Am I in trouble?

If your property genuinely meets both conditions of the personal-use exemption — cost under $100,000 CAD (at time of purchase, converted to CAD) AND exclusively personal use with zero rental use in any of those years — then T1135 was not required, and there is no non-compliance issue. The personal-use exemption is real and legally sound under the Income Tax Act. However, verify both conditions carefully: (1) What was your exact CAD cost at purchase? Include all closing costs (legal fees, title insurance, notary, closing costs — these are generally added to the cost base). Run the Bank of Canada rate for your purchase date and confirm you were under $100,000 CAD total. (2) Was there any rental use in any of those four years? One Airbnb booking in any year would create a filing obligation for that specific year. If both conditions check out, you have no T1135 issue. If you discover a year where there was rental use or where the cost exceeded $100K, consult a Canadian tax professional about the Voluntary Disclosures Program.

My foreign property is in my spouse's name, not mine. Do I still need to file T1135?

T1135 is an individual filing obligation — each person files based on the foreign property they own or control. If the property is registered solely in your spouse's name, your spouse has the T1135 obligation (if applicable), not you. However, if you are a beneficial owner or have a beneficial interest in the property even if not on title, CRA may consider you a co-owner for T1135 purposes. The definition of 'specified foreign property' includes property in which you have a beneficial interest — not just registered ownership. If you contributed funds to purchase the property (even if not on title), CRA may consider you a beneficial owner of your contributed share. In practice, most Canadian couples who own foreign property jointly should both file T1135 reflecting their respective ownership share. Consult a Canadian tax professional if the ownership structure is not straightforward.

I'm converting my personal-use vacation home to a rental. What do I need to do for T1135?

Starting from the first year you earn rental income (even one booking), the personal-use exemption no longer applies, and T1135 is required for that year if the adjusted cost base exceeds $100,000 CAD (or even if it doesn't — since any rental converts it to 'specified foreign property'). The practical steps: (1) File T1135 with your T1 return for the year you first earned rental income. Include the property's cost, year-end fair market value, and country. (2) Report rental income on Schedule T776 for foreign rental income. Report gross income in CAD, deduct eligible expenses (mortgage interest proportional to the year it was rented, property management fees, insurance for the rental period, maintenance). (3) Be aware that if you held the property as personal-use and then converted to rental, there may be a deemed disposition at fair market value at the conversion point — another reason to consult a Canadian tax professional when making this transition.

What CRA audit triggers exist for T1135 non-compliance?

CRA has several paths to identifying T1135 non-compliance. (1) Common Reporting Standard (CRS): Canada participates in the OECD's automatic exchange of financial information. Foreign financial institutions (banks, notaries in some countries) report Canadian-resident account holders to their local authorities, which then share data with CRA. Mexican SAT reports financial information on Canadian account holders to CRA. (2) FINTRAC: Large international wire transfers (over $10,000 CAD) are flagged; patterns of transfers to Mexico or other jurisdictions can trigger review. (3) Inconsistent return data: Rental income reported on T776 for a foreign property with no T1135 filed creates an inconsistency CRA may follow up on. (4) Information from third parties: Disgruntled ex-partners, business disputes, or other tips can trigger targeted audits. (5) T1 income patterns: If your Canadian income suddenly drops while you appear to be spending significantly less (bank accounts, credit card patterns), this can trigger a lifestyle audit. T1135 compliance is an ongoing CRA enforcement priority — the 2024 and 2025 federal budgets both noted enhanced foreign compliance enforcement.

My Mexican condo cost $75,000 USD. The Canadian dollar was weak when I bought — the CAD equivalent was $103,000. Do I file T1135?

Yes — T1135 is required. The $100,000 threshold for T1135 is measured in Canadian dollars using the Bank of Canada exchange rate on the date of purchase. If the USD/CAD rate at the time of your purchase converted your $75,000 USD to more than $100,000 CAD, your adjusted cost base in CAD exceeds the threshold, and T1135 is required regardless of whether you rent the property. The exchange rate used is the Bank of Canada closing rate on the purchase date (or the noon rate for older transactions). This is a common surprise for Canadians who think in USD — the CAD calculation at the time of purchase controls, and a weak CAD period can push a USD $75,000–$85,000 property over the threshold.

I let my family member stay in my Mexican property for two weeks and charged them a nominal amount. Does that count as rental?

Almost certainly yes. The personal-use exemption requires exclusive personal use — meaning use only by you (and arguably your immediate family without any payment). Charging any amount — even $1 — to a family member converts the use to a commercial rental for that period, removing the personal-use exemption for the year. Even below-market or nominal rent counts as rental income in CRA's view. There is a concept of 'personal-use property' versus 'rental property' in the Income Tax Act, but for T1135 purposes, the distinction hinges on whether the property is exclusively for personal use. CRA's position is that any commercial rental, even minimal, removes the exemption. If family members stay for free (no payment exchanged) and the property is otherwise used personally by you, the exemption is more defensible — but any payment changes the analysis.

I haven't filed T1135 for the past four years but my property is personal use only and under $100K CAD cost. Am I in trouble?

If your property genuinely meets both conditions of the personal-use exemption — cost under $100,000 CAD (at time of purchase, converted to CAD) AND exclusively personal use with zero rental use in any of those years — then T1135 was not required, and there is no non-compliance issue. The personal-use exemption is real and legally sound under the Income Tax Act. However, verify both conditions carefully: (1) What was your exact CAD cost at purchase? Include all closing costs (legal fees, title insurance, notary, closing costs — these are generally added to the cost base). Run the Bank of Canada rate for your purchase date and confirm you were under $100,000 CAD total. (2) Was there any rental use in any of those four years? One Airbnb booking in any year would create a filing obligation for that specific year. If both conditions check out, you have no T1135 issue. If you discover a year where there was rental use or where the cost exceeded $100K, consult a Canadian tax professional about the Voluntary Disclosures Program.

My foreign property is in my spouse's name, not mine. Do I still need to file T1135?

T1135 is an individual filing obligation — each person files based on the foreign property they own or control. If the property is registered solely in your spouse's name, your spouse has the T1135 obligation (if applicable), not you. However, if you are a beneficial owner or have a beneficial interest in the property even if not on title, CRA may consider you a co-owner for T1135 purposes. The definition of 'specified foreign property' includes property in which you have a beneficial interest — not just registered ownership. If you contributed funds to purchase the property (even if not on title), CRA may consider you a beneficial owner of your contributed share. In practice, most Canadian couples who own foreign property jointly should both file T1135 reflecting their respective ownership share. Consult a Canadian tax professional if the ownership structure is not straightforward.

I'm converting my personal-use vacation home to a rental. What do I need to do for T1135?

Starting from the first year you earn rental income (even one booking), the personal-use exemption no longer applies, and T1135 is required for that year if the adjusted cost base exceeds $100,000 CAD (or even if it doesn't — since any rental converts it to 'specified foreign property'). The practical steps: (1) File T1135 with your T1 return for the year you first earned rental income. Include the property's cost, year-end fair market value, and country. (2) Report rental income on Schedule T776 for foreign rental income. Report gross income in CAD, deduct eligible expenses (mortgage interest proportional to the year it was rented, property management fees, insurance for the rental period, maintenance). (3) Be aware that if you held the property as personal-use and then converted to rental, there may be a deemed disposition at fair market value at the conversion point — another reason to consult a Canadian tax professional when making this transition.

What CRA audit triggers exist for T1135 non-compliance?

CRA has several paths to identifying T1135 non-compliance. (1) Common Reporting Standard (CRS): Canada participates in the OECD's automatic exchange of financial information. Foreign financial institutions (banks, notaries in some countries) report Canadian-resident account holders to their local authorities, which then share data with CRA. Mexican SAT reports financial information on Canadian account holders to CRA. (2) FINTRAC: Large international wire transfers (over $10,000 CAD) are flagged; patterns of transfers to Mexico or other jurisdictions can trigger review. (3) Inconsistent return data: Rental income reported on T776 for a foreign property with no T1135 filed creates an inconsistency CRA may follow up on. (4) Information from third parties: Disgruntled ex-partners, business disputes, or other tips can trigger targeted audits. (5) T1 income patterns: If your Canadian income suddenly drops while you appear to be spending significantly less (bank accounts, credit card patterns), this can trigger a lifestyle audit. T1135 compliance is an ongoing CRA enforcement priority — the 2024 and 2025 federal budgets both noted enhanced foreign compliance enforcement.

Last updated: March 26, 2026

Reviewed on March 2026 by the Compass Abroad editorial team

Does Your Vacation Home Trigger T1135? The Personal-Use Exemption Explained

Personal-use foreign property can be exempt from T1135 — but only when two conditions are both met: (1) the adjusted cost base of the property is under $100,000 CAD, and (2) the property is used exclusively for personal use with zero rental income. If the cost exceeds $100,000 CAD, T1135 is required even for a purely personal-use vacation home. One rental night removes the exemption entirely.

The most common T1135 mistake for vacation property owners: believing the personal-use exemption applies to all vacation homes regardless of cost. It does not. The $100,000 threshold is based on cost in Canadian dollars at the time of purchase — not today's market value, and not the USD price you may think of the property in. Understand exactly where your property sits before assuming exemption applies.

Key Takeaways

T1135 is NOT triggered by personal-use foreign property — but only if the property is used exclusively for personal use (never rented) AND the adjusted cost base is under $100,000 CAD. Both conditions must be met.
The $100,000 threshold is based on COST (adjusted cost base) — what you paid for the property in Canadian dollars — not the current market value. A property purchased for $85,000 CAD and now worth $200,000 CAD is still exempt if used personally.
The word 'exclusively' in the personal-use exemption is the critical boundary: one rental night to anyone — a friend, a family member, a stranger on Airbnb — removes the personal-use exemption entirely for that tax year. There is no partial exemption.
If your foreign property cost $100,000 CAD or more, T1135 is required annually — even if you never rent it and use it purely for personal vacations. The cost threshold applies regardless of use.
For a property purchased in USD, the adjusted cost base is calculated in CAD using the Bank of Canada exchange rate on the date of purchase. Currency fluctuations after purchase do not change the cost base for T1135 threshold purposes.
T1135 is a reporting form, not a tax form — filing it does not create additional income tax. The penalties for not filing are $25/day late, maximum $2,500 per year. The real risk is the gross negligence penalty (5% of the highest property cost) if CRA determines you knowingly failed to file.
If you have rental income on your return but no T1135, CRA may flag the inconsistency. If you have a T1135 but no rental income, that is fine — T1135 reporting is independent of rental income reporting.
The adjusted cost base includes the purchase price plus eligible acquisition costs (legal fees, title insurance, closing costs). Renovation costs added after purchase may or may not be capitalized depending on their nature — consult a Canadian tax professional.

The Two-Condition Test: When the Exemption Actually Applies

The personal-use exemption for T1135 is found in the definition of "specified foreign property" in subsection 233.3(1) of the Income Tax Act. Property held exclusively for personal use by you or a related person is excluded from the definition — meaning it is not "specified foreign property" and no T1135 obligation arises.

But the Income Tax Act separately sets the $100,000 reporting threshold. Even if the personal-use exclusion technically removes a property from "specified foreign property," CRA’s administrative position is that properties above the $100,000 cost threshold must be reported regardless of use. The practical result: both conditions must be met — exclusively personal use AND cost under $100,000 CAD — for the exemption to provide a clean T1135 exemption.

The Cost Rule: What Counts Toward $100,000?

The threshold is the adjusted cost base (ACB) — roughly the purchase price plus direct acquisition costs (legal fees, notary, title insurance, closing costs incurred to acquire the property). The ACB is measured in Canadian dollars at the time of purchase, using the Bank of Canada exchange rate on the date of acquisition.

Key consequences of the cost-basis rule:

A property purchased when the CAD was weak (USD strong) has a higher CAD ACB than the same USD price purchased during a strong-CAD period.
Current market value is irrelevant — a property bought for $85,000 CAD in 2015 and now worth $250,000 CAD is still measured against its $85,000 ACB.
Closing costs increase your ACB — if your purchase price was $90,000 USD and closing costs added another $8,000 USD, your total CAD ACB includes both.
Capital improvements to the property may or may not be added to ACB depending on their nature (capital vs repair).

Six Common Scenarios: T1135 Required or Not?

T1135 vacation home scenarios — personal use exemption analysis
Scenario	T1135 Required?	Why
Mexican condo purchased for $80,000 USD (~$108,000 CAD) — personal use only, never rented	YES — required	Cost exceeds $100,000 CAD threshold. Personal-use exemption requires cost UNDER $100K; this property fails the cost test.
Mexican condo purchased for $65,000 USD (~$88,000 CAD) — personal use only, never rented	NO — exempt	Cost is under $100,000 CAD AND exclusively personal use. Both conditions met — full T1135 exemption applies.
Same $65,000 USD condo — rented on Airbnb for 3 weeks per year	YES — required	Rental use removes the personal-use exemption regardless of cost. Now T1135 is required AND rental income must be reported on T776.
Portuguese apartment purchased for €150,000 (~$235,000 CAD) — personal use, never rented	YES — required	Cost exceeds $100,000 CAD — personal-use exemption only works below the $100K cost threshold.
Costa Rica property purchased for $70,000 USD (~$95,000 CAD at time of purchase) — later appreciated to $180,000 USD	NO — exempt (if personal use only)	The $100K threshold is based on COST at time of purchase, not current market value. $95K CAD cost = below threshold = exempt if personal use only.
Foreign property purchased for $120,000 CAD — never rented, exclusively personal use	YES — required	Cost exceeds $100,000 CAD. Personal-use property IS exempt, but only when cost is below $100K. Above the threshold, even personal-use property must be reported.

"Exclusively" — The Most Expensive Word in T1135

The personal-use exemption uses the word "exclusively" — and CRA interprets it strictly. There is no partial personal-use exemption. In any tax year where the property generates any rental income at all — one Airbnb booking, one week rented to a neighbor, one night of commercial use — the personal-use exemption disappears entirely for that year.

The year-by-year nature of the exemption is important: if you rented the property in 2023 (T1135 required for 2023), used it purely personally in 2024 (T1135 not required for 2024 if cost under $100K), and rented it again in 2025 (T1135 required for 2025) — each year is evaluated independently. The 2024 year stands on its own.

See our comprehensive T1135 compliance guide for the full penalties structure and Voluntary Disclosures Program details.

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