Buying a home is a big life decision. It’s important to know how that decision will affect your tax situation. When buying a home in BC you are not required to pay any yearly taxes unless you are making rental income on your home or flipped the home for an income. You are however, required to pay a property transfer tax when you purchase a new home.
Property Transfer Tax
In BC every home buyer must pay the Provincial Property Transfer Tax (PTT) when they buy a new home.
The PTT in your area goes to local programs like police and fire protection, road maintenance, and emergency rescue services. It is a crucial part of keeping your community safe.
The PTT tax in BC is calculated at a rate of
- 1% on the first $200k of the home purchase price
- 2% on the remainder up to $2 million dollars, then 3% on anything over $2 million
- Further 2% on anything over $3 million in a residential area
If you are a foreign buyer, then you are subject to an additional property transfer tax of 20% of the market value of your share of the purchased property.
Property Transfer Tax Exemptions
There are two cases where a home buyer is exempt from paying property transfer taxes.
- First Time Home Buyer
- New Home Build
First time home buyer
As a first-time homebuyer, you are eligible to apply for the First Time Home Buyers Program which will reduce or eliminate the amount of PTT you will pay. To qualify for the program you and your spouse or common-law partner will not have lived in a house owned by either party for a minimum of 4 years preceding the purchase of your new home (in accordance with CRA tax filing). If you qualify you can get a full or partial exemption from the tax.
If the home is under $500k you are fully exempt up to a total of $8,000. If the house is over $525k you qualify for a partial exemption. Above $525k the exemption does not apply.
Newly Built Homes
If you have moved into a new home build you are exempt if the purchase price of the home is priced up to $750k. You have partial exemption up to $800k and no exemption above $800k. This applies to any new build including a single-family unit on new land, apartment or condominium, manufactured home, and other newly built homes.
To qualify for the exemption there is an occupancy requirement. You must move into the new home within 92 days the property is registered to the Land Title Office and continue to occupy the home as the principal residence for the remainder of the first year.
Buying a Home in Langley & Surrey
All the rules apply to the entirety of the province. In our local area, however, we are lucky as new builds are on the rise in Surrey and Langley. Over 64% of all new builds registered in January of 2020 were set for the Surrey, Langley, and Vancouver areas. That makes the possibility of a new home build exemption much more likely It is important to keep in mind the cost requirements on the exemption. If you have any questions about a home before you buy we are here to help. Contact us, no question is too big or too small.
The only way your yearly tax return will be affected by a home purchase is if you purchase a home with rental income. You must claim all rental income as income in the year it was earned to the CRA. It is recommended that you speak to an accounting specialist as to how income is reported can change situationally and claims can be managed in different ways depending on the job or business you own. We strongly advise speaking to a specialist or asking more detailed questions to your realtor if you are looking for a home with rental income.