The BC government is introducing a new tax aimed at people who buy and sell homes within a short period, specifically less than 2 years. This tax is designed to discourage people from quickly flipping houses for profit and is separate from any existing federal rules about property flipping. Here's how it breaks down:
The tax kicks in for properties sold on or after January 1, 2025. So, if you buy a property and sell it within two years after this date, you could be subject to this extra tax.
The amount you'll pay depends on how long you've owned the property. If you sell within a year (365 days), the tax is 20% of your profit. If you sell anytime between one and two years (366 to 730 days), the tax rate gradually decreases to zero.
However, there are some exceptions. For example, there are exceptions such as if you are going through a divorce, job loss, having to move for work, or more. In these cases you might not have to pay the tax. There's also is special consideration if you're selling your main home within two years; you could exclude up to $20,000 from your taxable income.
The goal of the tax is to support more housing availability by discouraging quick flips, but it's designed not to penalize those adding to the housing supply or those affected by significant life events.
It applies to homes and land zoned for residential use, including pre-sale contracts (where you agree to buy a property before it's built or completed).
Examples
Quick Flip: Imagine you buy a house on April 1, 2024, and sell it on March 31, 2025, for a profit. Since you sold within 365 days, you'd have to pay a 20% tax on your profit.
Selling After a Year: If you bought a house on January 15, 2024, and sold it on January 16, 2025, you'd be in the phase where the tax rate starts to decrease, so you'd pay less than 20%.
Life Changes: Suppose you bought a home and unexpectedly lost your job six months later, forcing you to sell. In this case, you might not have to pay the flipping tax due to your situation.
By implementing this tax, the government hopes to discourage people from buying homes only to sell them quickly for a profit, which can drive up housing prices. Instead, the focus shifts towards making homes more accessible and available to those looking to live in them longer-term.
For more information you can check the government website here: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/bc-home-flipping-tax
Property transfer tax exemptions:
For more information you can check the government website here: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/bc-home-flipping-tax
Property transfer tax exemptions:
In BC, first-time homebuyers have a chance to save on their purchase through an exemption to the property transfer tax. This policy is designed to ease the financial burden for newcomers to the housing market. Here's how it functions and what's needed to qualify:
The exemption is available to Canadian citizens or permanent residents.
To qualify, you must have never owned a principal residence anywhere in the world.
Additionally, you must not have previously received a first-time homebuyers' exemption or refund.
The property you're buying should be intended as your primary residence.
There's a fair market value cap on the property to qualify for the exemption, which encourages the program's use for residential rather than investment purposes.
If the property exceeds certain value or size thresholds, a partial exemption may still apply.
The application for this exemption is usually processed by your legal professional during the home buying transaction.
After purchasing, there are requirements to maintain the exemption, such as moving into the property within a certain period and using it as your principal residence for a specified time.
This program aims to make homeownership more accessible to first-time buyers by reducing the upfront costs associated with purchasing a home.
For the other qualifications and for more details you can check the government site for more information:
https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/exemptions/first-time-home-buyers
For the other qualifications and for more details you can check the government site for more information:
https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/exemptions/first-time-home-buyers
If you are interested , or if you are considering buying or selling property - expertise is invaluable. Matt Gul, one of West Vancouver's top Realtors, is well-versed in these complexities and can offer guidance and assistance. To learn more, please contact Matt Gul at 778-888-8888 or via email at matt@mattgul.com.
Summarized by Onur Gul.
Summarized by Onur Gul.
Sources:
Finance, M. of, & Branch, I. T. (2024, February 22). BC Home flipping tax. Province of British Columbia. https://www2.gov.bc.ca/gov/content/taxes/income-taxes/bc-home-flipping-taxFinance, M. of, Branch, P. T., & Division, R. (2024, February 26). First Time Home Buyers’ program. Province of British Columbia. https://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/exemptions/first-time-home-buyers