Welcome to the fourth and final installment in our taxes in real estate series. Over the previous three Monday Blog Posts, you’ve learned about property tax, income tax, HST, land transfer tax, and capital gains tax.
There are two more taxes you need to be aware of if you’re buying in Toronto and the GTA: the Toronto Vacant Property Tax and non-resident taxes.
Toronto Vacant Property Tax
In 2022, the City of Toronto implemented a Vacant Home Tax, intended to increase housing supply by discouraging empty homes. The tax requires every homeowner to declare the occupancy of their home every year.
How Much is the Vacant Home Tax?
Homes declared, deemed or determined to be vacant for more than 6 months during the previous year are taxed at 3% of the Current Value Assessment (CVA). The CVA is the value the city uses to calculate your property taxes and may not be equal to the market value of your home.
Note: The CVA and occupancy status of the previous year are used to calculate the amount of tax owing in the following year, so if a home with a $1,000,000 CVA in 2023 was vacant for more than 6 months in 2023, the 2023 vacant home tax of 1% would be paid in 2024. If the home is vacant in 2024, then the 3% vacant home tax would be paid in 2025.
The city issues Vacant Home Tax Notices at the end of March, with payments due in three installments in May, June and July.
Example:
In 2024, THE CVA of your property is $1,000,000. The home remains vacant for at least 6 months in 2024, and doesn’t qualify for any exemptions.
Vacant Home Tax = 3% x $1,000,000 = $30,000
You will be required to pay vacant home tax of $30,000 in 2025 (payable in 3 instalments)
Non-Resident Taxes
Home Buyers
Non-resident Buyers who do not have Canadian citizenship who are buying a home anywhere in Ontario are now required to pay a 25% Non-Resident Speculation Tax on closing.
Home Sellers
When it comes to selling a home, there are special tax implications for non-residents too. The Canada Revenue Agency defines a non-resident as someone who: ? normally, customarily, or routinely lives in another country and is not considered a resident of Canada; or
• does not have significant residential ties in Canada; and
• lives outside Canada throughout the tax year; or
• stays in Canada for less than 183 days in the tax year.
Note: there are a few other exceptions listed on the CRA website.
In most cases, non-residents are subject to tax on any income or gains resulting from the sale of a taxable Canadian property, including residential homes, condos, vacation properties or land.
When a non-Canadian resident sells a property, the Buyer must withhold and remit a portion of the purchase price to the Canada Revenue Agency (CRA). Generally, this amount is 25% of the gross selling price.
Alternatively, a Certificate of Compliance related to the property sale can be filed and approved by the CRA to reduce or eliminate the withholding taxes. Upon filing this Certificate of Compliance, the 25% withholding tax required is calculated on the gross sales proceeds net of the property’s purchase cost (or, in other words, the net profit).
Also, non-residents must file a Canadian tax return by April 30, following the year they sold their property. Generally, upon filing a tax return, part of the withholding tax is refunded to the Seller, as the 25% withholding tax is usually a lot higher than the actual taxes owed. At this point, you can also claim expenses like legal fees and commissions against the income from the sale.
Note: we can’t give advice on non-resident taxes, so talk to your accountant.
I hope this four-part series on “Taxes In Real Estate” has been educational and informative for you. Should you have any questions, comments, or concerns, please don’t hesitate to reach out to me at 905-683-7800, and I would be more than happy to answer any questions you may have.
Thanks for reading today’s BLOG!!!
Brian Kondo
Sales Representative / Team Leader
The Brian Kondo Real Estate Team
Re/Max Hallmark First Group Realty Ltd.
905-683-7800 office
905-426-7484 direct
brian@briankondo.com
www.BrianKondo.com
www.BrianKondoTeam.com
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