The provincial Budget 2024 revealed a new tax is on the horizon for sellers of real estate within British Columbia. Aimed at restricting “house flipping,” the reported intent of this tax is to make real-estate investing for short-term gains less attractive, hopefully increasing housing availability and reducing the cost of homes for BC residents. While the final structure of the tax is uncertain, some details have been released.
Coming into effect as of January 1, 2025, the tax will apply to the income generated from sales of relevant real estate that has been owned for less than two years. Notably, this tax will apply to purchases made before the tax was introduced, so those who purchase land prior to January 1, 2025, will not be able to avoid application of this tax to their property.
The income from a sale, presumably referring to any gain in value over the purchase price, will be subject to a tax rate of 20% if the property is sold within the first year of ownership, with a steadily declining tax rate during the second year until it reaches zero on the 730th day of ownership.
The application of this tax will be broad, reportedly including sale of properties with a housing unit, properties zoned for residential use, and the right to acquire such properties (such as an assignment of a contract), which is also deemed to be a taxable disposition.
As with other property-related taxes, and in line with the stated intention of targeting short-term investors, there are exemptions to this tax for selected circumstances, which may result in an unplanned or involuntary sale of property. Presently the exemptions include:
- Separation or divorce
- Death
- Disability or illness
- Relocation for work
- Involuntary job loss
- Change in household membership
- Personal safety
- Insolvency
There is a further exemption for the sale of real estate located on reserve lands, treaty lands, and lands of self-governing Indigenous Nations. Further exemptions and variations, such as the sale of a primary residence within 2 years being subject to a $20,000.00 deduction in the applicable tax, are expected to be provided.
For more information on the upcoming “house-flipping” tax or any real estate, business law, or wills, estates, and trusts needs, please contact Mark Brade at [email protected] or by phone at 250-869-1156.
