The information below is given as a starting point for thinking about tax implications of your home purchase or sale but may not be current and should not be relied upon. Talk to your lawyer and/or accountant for the most up-to-date advice as these rules are constantly changing.
PROPERTY TAX
Property tax is what you as a homeowner pay every year to your municipality. This tax pays for services such as road maintenance, schools and policing. The tax is based on the assessed value of your home, to which each municipality applies their own tax rate, also known as “mill rate”. The rate changes every year based on the municipality’s budget and the assessed values of the houses in its boundaries. When you are looking to buy a house, you can ask your Realtor for the most recent property assessment and property tax.
Property taxes are due July 1. You’ll get a property tax notification in the mail a few months before, stating the tax amount. Most people choose to have their bank pay their taxes for them and save up for this as part of their mortgage payment. You can also pay the municipality directly. Don’t forget to apply for the principal residence or senior grant if you qualify.
Property assessments are mailed to you early January, and are based on the assessed value of the land and home in the previous summer. If you don’t agree with the assessment, you can appeal this with the BC Assessment Authority within the prescribed timeframe.
School tax.
As of 2019, if your property is assessed at $3,000,000 or more, an additional school tax applies. The additional tax rate is:
- 0.2% on the residential portion assessed between $3 million and $4 million
- 0.4% tax rate on the residential portion assessed over $4 million
Speculation tax
If you own a property in the Victoria area that is not your primary residence and that is not rented out long-term (3 months in 2018 and at least 6 months in 2019 with a minimum rental period of 1 month, so no vacation rentals) a so-called speculation tax applies. In 2018, the tax rate for all properties subject to the tax is 0.5% on the property value. In 2019 and subsequent years, the tax rates will be as follows:
- 2% for foreign investors and satellite families;
- 1% for Canadian citizens and permanent residents who do not live in British Columbia; and
- 0.5% for British Columbians who are Canadian citizens or permanent residents (and not members of a satellite family). There is a tax credit for eligible British Columbians that will offset tax on a second home valued up to $400,000.
PROPERTY TRANSFER TAX
Property transfer tax (PTT) is the tax you pay to the BC government when you buy a home. You pay this tax upon completion of the purchase, your lawyer will tell you the exact amount of taxes payable, if any, together with the purchase price and any adjustments.
The amount of tax depends on the value of the home you are buying and on your Canadian residency status. Tax rates are:
- 1% on the first $200,000
- 2% from $200,000 to $2,000,000
- 3% on the portion of the fair market value greater than $2,000,000
- And an ADDITIONAL 2% on the portion of the fair market value greater than $3,000,000 (effectively 5% tax on the portion over $3,000,000).
If you are NOT a Canadian resident and buy a home in the Victoria area, an ADDITIONAL 20% foreign buyer property transfer tax applies. Talk to your lawyer to determine if this tax applies to you.
First-time-buyer exemption from the property transfer tax. In Victoria, if you are a resident of Canada and a first time buyer (that is, you have never owned an interest in land anywhere in the world), you don’t pay any property transfer tax (PTT) for properties up to $475,000, and an amount along a sliding scale up to $500,000,above which you pay the full property transfer tax. Not all types of properties qualify for this exemption and the exemption only applies if you intend to live in the home, not if it is an investment property.
Exemption for new homes up to $750,000. If you buy a newly constructed home under $750,000, you are a Canadian resident, and you intend to use the home as our principal residence, you do not pay PTT. You pay a reduced amount of PTT along a sliding scale up to $800,000, when full PTT applies.
GST ON NEW HOMES
When you buy a newly built home (not a resale home), you have to pay GST (Goods and Services Tax). This is a federal tax. You pay this tax upon completion of the purchase to the seller, who then has to remit that amount to the Federal Government. If you intend to live in the home, you qualify for a GST rebate. The seller and your lawyer will calculate this rebate amount and the purchase price will be adjusted accordingly.
GST ON RESALE HOMES
Generally when you buy a resale home, no GST is payable. However, if the home was used for commercial purposes (vacation rental, B&B, other business use) GST may be applicable.
CAPITAL GAINS TAX
When selling your principal residence and you are a Canadian resident for tax purposes, no capital gains taxes are payable when you sell. However, if the property is not your principal residence, or if you are not a Canadian resident for tax purposes, capital gains taxes are payable. Your lawyer or accountant can advise.