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Taxes to Be Aware of When Buying a Home in BC

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For homeowners there are an array of costs and fees that go beyond the initial cost of purchase, including maintenance, repair, and renovation. But in this post, we’re going to focus on the administrative costs of the various federal, provincial, and municipal taxes you will need to be aware of. 

This is especially true for first time buyers who may not know what even needs to be considered, and having a handle on the closing costs and taxes, as well as future fees, will help you make an informed and knowledgeable decision about your future. To help you out, here is an overview of the relevant taxes prospective BC homeowners should be aware of.

Please note that it is important to check with an accountant for any tax liabilities. This is just a general overview and is not intended to be legal or financial advice

Homeowner Grant

The homeowner grant is available to help homeowners reduce the amount of property taxes they pay on a principal residence. It is available to any homeowners who are paying taxes to either a municipality, or a province if they’re in a rural area. 

Most property owners will be eligible for the regular grant, provided your property is below the threshold, which for 2023 has been set at $2,125,000. If you meet all requirements but your property’s assessed or partitioned value is over $2,125,000, you may qualify for a grant at a reduced amount.

Plus there are further grants available to:

  • Seniors 

  • Veterans 

  • People with disabilities 

  • Those who are living with a spouse or relative who has a disability 

  • A spouse or relative of a homeowner who has passed away 

The amount of money you receive for the regular grant will depend on the location of your property. For those in the Capital Regional District, Metro Vancouver, and the Fraser Valley Regional District, it is $570, and $770 for all other areas. You may only receive one grant per year, however this can be applied for at any point during the tax year. 

Property Transfer Tax 

When you purchase a property, you need to be aware of the full cost, and this may go beyond the mere purchase price. You will also need to be aware of the one time payment that comes in the form of the Property Transfer Tax.

This tax is based on the fair market value of the property on the day it was registered, and is charged at a rate of 1% on the first $200,000, 2% for $200,000 to $2 million, and then 3% for greater than $2 million. And if it’s worth over $3 million, a further 2% tax will be applied.

However there are a number of exemptions permitted, including for First Time Buyers, Newly Built Homes, and Family Exemptions. See here for the full list.

First Time Home Buyers' Program

In addition to further costs, there are options that may reduce the amount of tax you’ll pay, or even eliminate it entirely, especially for first time buyers. Through the first time home buyers' program you may be eligible for either a full or partial tax exemption. 

In order to qualify for the exemption you must be: 

  • Either a Canadian citizen or a permanent resident. 
  • Have either lived in BC for at least a year before the date of property registration or filed at least 2 income tax returns as a BC resident in the last 6 taxation years 

  • Have never owned a registered interest in a property that was your principal residence in any location globally 

  • Have never previously received a first time home buyers' exemption or refund

There are also qualifying conditions the property itself must meet: 

  • It must be for use as your principal residence 

  • Have a fair market value of $500,000 or less

  • Be 0.5 hectares (1.24 acres) or smaller in area 

To apply, your legal professional will apply for the exemption in the property transfer tax return. When the return is submitted, you must meet additional requirements during the first year you own the property to keep the tax exemption.

Newly Built Home Exemption

If you purchase a newly built home you may qualify for a full or partial exemption from paying the property transfer tax. A newly built home includes a house converted from an existing non-residential structure on the land (such a warehouse converted into apartments) or a house resulting from a subdivision. See here for the full list of what counts as a newly built home.

To qualify for a full exemption you must be a Canadian citizen or permanent resident, and the property must be your principal residence, have a fair market value of $750,000 or less, and be smaller than 1.24 acres. If the property is larger and valued up to $800,000 you may qualify for a partial exemption.

To apply simply enter exemption code 49 on your Property Transfer Tax Return.

If you qualify for the exemption but didn’t apply when you registered your home, or if you paid the property transfer tax when purchasing vacant land but now have a newly built home on the land, you may apply for a refund. Important to note that the refund can only be applied for after the first anniversary of the registration date and within 18 months from the date you registered the property at the Land Title Office.

BC Property Tax

In addition to the fees levied at the point of purchase, there are also regular taxes that homeowners must pay, the primary one will be property tax. This is calculated at a municipal level and will be based on the valuation of the property. This is used for various services and amenities provided by the local government, and will be included as a parent of your annual BC property tax assessment. 

Because it’s based on the assessed value of your property, it’s important that you’re aware of what kind of taxes you will be paying. To find out more details, you can visit the BC Assessment website and input your address to get an accurate and up to date value. 

GST on New Homes

The British Columbia Goods and Services Tax (GST) is a 5% tax paid on the purchases of goods or services for personal use. It is also applied to the purchases of a new build home. 

This fee will be charged on top of the purchase price but will only be assessed on newly constructed properties that have not been previously occupied. Any property that does not meet this criteria, such as one that has been lived in previously, will be exempt from the GST. 

It’s always good to verify if GST is going to be added to the purchase price, or if it’s already been added if needed. If it has been already added, make sure that your lawyer or notary is aware so that you do not get charged twice.

Multiple Buyers 

Under certain conditions, you may be able to claim a rebate on the GST if there are multiple buyers involved in the purchases. This rebate is available if multiple individuals are purchasing a house or a share of the capital stock of a co-operative housing corporation. It is also available if they are constructing or substantially renovating the house in question. This rebate will allow you to recover some of the GST paid on the property. 

When it comes to purchasing a new home, it can be a complicated and confusing process. This is why you need real estate experts who can advise you on every detail and here at Madsen Langlois we’ve helped countless people get on the property ladder, so to find out how we can help you, get in touch with us today! 

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