NEW BC HOME FLIPPING TAX AND PTT EXEMPTIONS EXPLAINED
Two new changes to the real estate sector. The BC government has announced a new Flipping Tax starting January 1st 2025. The proposed BC Home Flipping Tax will apply to any home or property zoned for residential use sold within two years of purchase.
The BC Flipping Tax is in addition to the federal residential flipping tax, which turns taxation on property into business income, not capital gains. Income earned from the sale of properties located on reserve lands, treaty lands, and lands of self-governing Indigenous Nations will not be subject to this tax. The Flipping tax will also affect assigned pre-sale contracts within two years of signing the pre-sale.
The tax rate will vary depending on how long the home or property has been owned. If sold within the first 365 days, the seller will pay a 20 percent tax rate on the income they earn from the sale. After that, the rate will begin to decline until it reaches zero percent at 730 days.
Exemptions are:
· Separation or divorce
· Death
· Disability or illness
· Relocation for work
· Involuntary job loss
· Change in household membership
· Personal safety
· Insolvency
The BC government made changes to the Property Transfer Tax (PTT). The fair market value (FMV) threshold for the First Time Home Buyer (FTHB) exemption was increased. As of April 1, 2024, the FTHB exemption will apply to properties in a different way. For properties with a FMV of less than $835,000, PTT is not payable on the first $500,000, but payable on the difference between the FMV and $500,000.
Effective April 1, 2024, the Fair Market Value (FMV) threshold to claim the Newly Built Home (NBH) Exemption will be increased from $750,000 to $1,100,000. A partial exemption is also available for properties with a FMV just above the threshold. The phase-out range is $50,000 above the threshold, so properties with a FMV of greater than $1,150,000 will not be able to claim the NBH Exemption.