The British Columbia government recently announced significant changes to provincial tax laws, providing qualifying home buyers with some relief from property transfer tax payable on a purchase and introducing a BC Home Flipping Tax . Here’s a breakdown of the key updates:
1. Introduction of the BC Home Flipping Tax
In early spring 2024, the Government of BC will introduce legislation to impose a new tax on sale proceeds received from the sale of residential property in BC. This tax applies to residential properties owned for less than two years, with rates at 20% for sales within 365 days, and will decline to zero between 366 and 730 days. It is payable in addition to federal or provincial income taxes incurred from the sale of property.
The tax will also apply to assignments of contracts to purchase residential properties.
The tax will apply to properties sold on or after January 1, 2025 and will apply even if seller has purchased the property before January 1, 2025. For example: if you purchased your home in February 2023 and sell the same home on January 1, 2025, you will be deemed to have held the home for less than two years and the income from the sale will be subject to the tax.
Exemptions will be available for certain life circumstances such as separation, death, disability or illness, relocation for work, involuntary job loss, insolvency, change in household membership, or personal safety.
In addition to these exemptions, individuals selling their primary residence within two years can exclude up to $20,000.00 when calculating taxable income.
2. First-Time Home Buyers’ Exemption Threshold Increased
The first time home buyers’ exemption eliminates the property transfer tax liability for eligible first time home buyers, provided the fair market value of the purchase is below the designated threshold.
Effective April 1, 2024, the property transfer tax exemption for first-time home buyers sees a substantial increase in the threshold, rising from $500,000.00 to $835,000.00. The exemption eliminates the tax on the first $500,000.00 of a property’s fair market value. The exemption is phased out between $835,000.00 and $860,000.00, with complete elimination of the exemption at $860,000.00
3. Newly Built Home Exemption Threshold Increased
The newly built home exemption exempts qualifying purchasers from property transfer tax for the purchase of a principal residence.
Effective April 1, 2024, the newly built home exemption from property transfer tax gets a boost, increasing the fair market value threshold from $750,000.00 to $1,100,000.00. The exemption is phased out between $1,100,000.00 and $1,150,000.00, with complete elimination of the exemption at $1,150,000.00.
4. Enhanced Exemption for New Purpose-Built Rental Buildings
Effective for transactions that occur between January 1, 2025 and December 31, 2030, purchases of new qualifying purpose-built rental buildings will be exempt from property transfer tax between January 1, 2025, and December 31, 2030.
Purpose-built rental buildings are those that are non-stratified, held as rentals for a monthly basis or longer, for at least 10 years. The residential portion of the building must be entirely used for rental purposes and have at least four apartments.
5. Speculation and Vacancy Tax – Definition of Registered Occupier Amended
Effective January 1, 2024, registered leaseholders will be considered the registered occupier for speculation and vacancy tax purposes and be responsible for the tax. This shifts the speculation and vacancy tax responsibility from the fee simple owner of a leasehold property to the registered leaseholders who have control over how the property is used.
Registered leaseholders who are not already required to declare in 2024 will do so for the first time in 2025, based on property use in 2024.
If you have questions or concerns about how these upcoming changes to provincial tax laws apply to your proposed purchase, sale or lease of property, please reach out to our Real Estate Group.
