BC Real Estate Taxes
Owning residential real estate in British Columbia is expensive, as you well know, and thanks to recent changes on both a provincial and municipal level, it’s also a great deal more complicated.
Most of the changes were brought about by BC’s 2018 Budget, but a few of them got started in 2017. The targets for the majority of these changes are foreign individuals and companies, real estate speculators, and anyone hanging about in the luxury market.
However, there may be some unintended impact, particularly to those BC residents who own secondary homes, or family cabins. We’ll know more about what that impact might look like “in the coming months,” according to the BC government.
The British Columbia Property Tax
The basic property tax in BC is calculated upon a “mill rate” that is multiplied by a property’s assessed value. The mill rate is recalculated each year to meet a revenue target.
The 2018 BC Budget made some changes to the calculation, introducing two new progressive tiers on top of the basic property tax, starting in 2019. These two tiers, unlike the mill rate, have fixed rates.
The first tier, for assessed property values above $3 million, adds a rate of 0.2%. So if your property is worth $4 million, you would pay an additional 0.2% on the $1 million above the threshold, or $2,000 per year in additional property taxes.
The second tier, for assessed property values above $4 million, adds a rate of 0.4%. So if your property is worth $5 million, you’ll pay that $2,000 noted above, plus an additional $4,000 on the next million, for a total of $6,000 in additional property taxes.
The British Columbia Property Transfer Tax
Previous to the 2018 Budget, the property transfer tax paid by the buyer of a home was calculated as follows:
- 1% on the first $200,000 of fair market value
- 2% on the fair market value over $200,000 but below $2,000,000
- 3% on the portion of the fair market value greater than $2,000,000
Budget 2018 introduced a further 2% on the portion of the fair market value greater than $3,000,000.
As an example, this would mean:
- $18,000 on a $1,000,000 home
- $38,000 on a $2,000,000 home
- $68,000 on a $3,000,000 home
- $118,000 on a $4,000,000 home
The British Columbia Foreign Buyers Tax
In 2016, the previous BC government introduced a 15% foreign buyer tax. This is a property transfer tax that applies to the share of property transferred to foreign individuals, corporations or taxable trustees ($150,000 on a $1,000,000 home).
Budget 2018 increases this to 20% ($200,000 on a $1,000,000 home) and expands its geographical scope beyond Metro Vancouver into the Fraser Valley, Vancouver Island, and the Central Okanagan.
The British Columbia “Speculation Tax”
The new tax introduced by BC’s Budget 2018 is not based on income or capital gains from the sale of a property, as one might expect. A tax that was based on a sale would target property flippers, a significant issue in BC.
Instead, this tax will be based on the assessed value of a property, starting in 2018. Owners of BC real estate who do not pay BC income tax will be subject to a 0.5% tax on that assessed value in 2018 ($5,000 on a $1,000,000 home), increasing to 2% ($20,000 on a $1,000,000 home) from 2019 onward. There are exemptions for those owners who rent out or live in that home.
This tax will apply to out of province Canadians who own property in BC as well, which was not welcome news to our many Alberta-based owners of wine country properties.
For those BC residents who own a principal residence in one community and a vacation property or cabin in another community, they will have a non-refundable income tax credit that will “help” to offset the BC tax. However, we don’t have clarity on whether this will be a full exemption or if family cabins will be impacted by this tax.
*Update: In 2019, the tax will remain at 0.5% for BC residents, increase to 1% for Canadians outside of BC, and to 2% for non-Canadians. BC Residents with second properties will be eligible for a $400,000 non-refundable tax credit, which means that those properties with assessed values below that amount will be exempt from the tax. The areas subject to this tax are highlighted in the below map:
A revised information sheet is available at the BC Government website.
The City of Vancouver “Empty Home Tax”
Also known as the Vacancy Tax, this was created with the intention of improving access to housing, both rental and owned, in the City of Vancouver. Starting in 2018, every owner of residential property in Vancouver is required to submit a property tax declaration to determine if their property is subject to the tax.
The deadline to complete your declaration for 2018, previously February 1, was extended to March 5, 2018.
Properties deemed “empty” will be subject to a tax of 1% of the property’s assessed taxable value ($10,000 on a $1,000,000 home). Net revenues from the tax will be invested into affordable housing initiatives.
Properties excluded from this tax will be those:
- Used as a principal residence by the owner, the owner’s family or friend, or other permitted occupier for at least 6 months of the year.
- Rented for at least six months of the year in periods of 30 consecutive days or more.
- Property is not a principal residence but you occupied it for at least 180 days of the year because you work in the city of Vancouver.
- Your property was unoccupied for more than 180 days because you or your tenant was undergoing medical care or was living in a hospital, long term, or supportive care facility.
- The property title was transferred during the year.
- The property was undergoing redevelopment or major renovations where permits were issued, carried out or under review.
- The property was part of a phased redevelopment with an application under review or approved rezoning with permits under review or approved rezoning where construction has commenced.
- Your property was unoccupied for more than 180 days because it was subject to a strata rental bylaw in existence as of November 16, 2016 that prohibited or limited rentals and the maximum allowable number of rentals had been reached.
- Your property was unoccupied for more than 180 days due to court order, court proceedings, or order of government prohibiting occupancy.
- Your property was unoccupied for more than 180 days because use of the property was limited to vehicle parking or the land parcel is limited such that a residential building could not be constructed.
If you live in the City of Vancouver, own a vacation property in BC, are planning on purchasing a home, or have had your BC home value rocket into the multiple millions, some or all of these tax changes will impact you in the year ahead.