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  • Writer's pictureAlisa Aragon-Lloyd

B.C.’s 2024 budget means tax changes in store for homeowners


By Alisa Aragon-Lloyd, as seen in "New Home + Condo Guide" magazine, March 27, 2024


In its 2024 budget, the B.C. government announced new measures that will have a direct impact on the mortgage industry and housing market in British Columbia.


Property transfer tax exemptions effective April 1, 2024


1. First-time homebuyer’s program

The fair market value threshold for the first-time homebuyer exemption was increased, which is great news for first-time homebuyers who are purchasing their first home and have never owned an interest in a principal residence anywhere in the world. Currently, if a first-time homebuyer purchases a property priced at less than $500,000, they don’t have to pay the property transfer tax. If the property is between $500,000 and $525,000, there is a partial exemption, and if the property is more than $525,000, they will have to pay the full property transfer tax, which is one per cent on the first $500,000 and two per cent on the balance.


This changes as of April 1, when the first-time homebuyer exemption will be applied differently. For properties valued at less than $835,000, the property transfer tax is not payable on the first $500,000, but instead, is payable on the difference between the value of $500,000 if the property is less than $835,000. If the property is valued between $835,000 and $860,000, then there will be a partial exemption based on a sliding scale. If the property is valued at more than $860,000, then there is no first-time homebuyer property transfer tax exemption.


For example, if the property value is $750,000, the property transfer tax that would be payable would be two per cent on $250,000 ($750,000 – $500,000). The new property transfer tax will be $5,000 compared to $13,000 (before April 1), a savings of $8,000.

To qualify for the new exemption, it doesn’t matter when the date of the contract of purchase was made, as long as the completion date is after April 1, 2024.


2. Buyers of newly built homes

There is welcome news for buyers of newly built homes (new construction) valued up to $1.1 million, who will also benefit from reduced costs through a newly implemented exemption.


Effective April 1, the purchase price threshold is increased from $750,000 to $1.1 million. There will be a partial exception for properties between $1.1 million and $1.15 million, and for properties valued at more than $1.15 million, there will be no exemption, and the full property transfer tax will be payable. It is important to note that the GST is not included in the purchase price when calculating the property transfer tax.

 

• B.C. home flipping tax

This tax will officially begin on Jan. 1, 2025, with the aim to deter speculators from inflating property prices by taxing the profits made from selling residential properties within two years of purchase.The seller will be taxed up to 20 per cent of the income from the sale of the property. Properties sold within one year are taxed at 20 per cent and will decline to zero between 366 and 730 days.


If you sell a property on or after Jan. 1, 2025, income earned from the sale will be subject to the new tax if the property was purchased less than two years prior. Whether income earned from the sale of the property is subject to the tax depends on when you purchased the property.


For example, if you purchased a property on May 1, 2023, and sell it on January 31, 2025, the income you earn from the sale of the property would be taxable. If you decide not to sell the property until June 1, 2025, then the income you earn from the sale of the property would not be subject to the tax.


It is important to note that the seller of the property may be a B.C. resident or a resident anywhere else in the world. There are some exemptions to the application of this tax, for example, if there are life circumstances motivating the sale of a property within two years such as separation or divorce, death, disability or illness, relocation to work, involuntary job loss, change in household membership, personal safety, or insolvency. Other exemptions may apply in the future.


• Pre-sale contracts

What happens if you enter into a pre-sale contract to purchase a property under construction and you close on the property once it is completed? With regards to the home flipping tax law and the two-year window, it will be considered that you have acquired the property on the date you entered the pre-sales contract.


If the person decides to assign the pre-sale contract and then close on the property that is already built, the acquisition date of the built property is the date they were assigned the contract.


If you assign the pre-sales contract to another person within two years of entering the pre-sales contract, then you will be subject to paying the flipping home tax on any profit received from the assignment.


For example, if you enter into a pre-sale agreement on May 1, 2025, for a condo that will be completed on Feb. 1, 2027, and you buy the condo when it is completed on Feb. 1, 2027, you will be considered to have acquired the property on May 1, 2025. However, if a person enters into a pre-sale agreement on May 1, 2025 for a condo that will be completed on Feb. 1, 2027, and on Nov. 1, 2025, that person assigns the contract to you, even if you buy the condo when it is completed on Feb. 1, 2027, you will be considered to have acquired it on Nov. 1, 2025.


More details on this will be outlined when the legislation is introduced.


If you have any questions on the property tax exemptions or the B.C. flipping home tax, please contact our office or a lawyer.

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