1. Targeting home flipping
The 2024 B.C. Budget introduces a tax on proceeds from the sale of residential real estate in British Columbia. Effective for properties sold after December 31, 2024, the tax targeting home flipping activity will apply to income from the sale of property (and the assignment of contracts to purchase property):
- with a housing unit
- zoned for residential use, and
- held for less than two years
The tax rate will be 20% for property sold within 365 days of purchase and will gradually decrease to zero for property held between 366 and 730 days. The tax is in addition to any federal or provincial income or capital gains tax incurred from the sale of property.
Exemptions will be available for:
- certain life events, including death, disability or illness, separation or divorce, personal safety, work relocation or involuntary job loss, insolvency, etc.
- property owners who add to the housing supply through construction and real estate development
Individuals who sell their primary residence within two years of purchase can exclude up to $20,000 when calculating their taxable income for purposes of this tax. Since the tax is applied to the proceeds from the sale of the home this reduces the net proceeds that the tax will apply to, effectively a $4,000 tax reduction ($20,000 x 20%).
2. Property transfer tax measures
Under the current rules there is an exemption from property transfer tax for first-time home buyers who use their home as a principal residence for properties valued at $500,000 or less. First-time Home Buyer for purposes of the property transfer tax is defined as:
- Be a Canadian citizen or permanent resident
- Have either:
- Lived in B.C. for at least a year immediately before the date you register the property
- Filed at least 2 income tax returns as a B.C. resident in the last 6 taxation years immediately before the registration date
- Have never owned a registered interest in a property that was your principal residence anywhere in the world at any time
- Have never received a first time home buyers’ exemption or refund
The tax is 1% on the first $200,000, 2% from $200,000 up to $2,000,000, 3% from $2,000,000 up to $3,000,000 and 5% on $3,000,000 and above. On a $500,000 home a first time home buyer can save up to $8,000 of property transfer tax.
Recognizing that not many homes in BC sell for under $500,000 anymore the government has announced it is increasing the qualifying value from $500,000 to $835,000. The exemption is still only on the first $500,000 but now more properties will be exempt from the tax if the value is $835,000 or less. In addition, there is a partial exemption available for properties in excess of $835,000 which phases out at $860,000. The increased exemption is proposed to be effective April 1, 2024.
The Budget 2024 also proposes to increase the exemption for newly built homes to $1.1 million (from $750,000). This exemption is phased out for a principal residence with a fair market value of $1.15 million.
In addition, the BC Budget exempts all transactions of purpose-built rental buildings from the general property transfer tax for transactions that occur between January 1, 2025 and December 31, 2030. Currently between January 1, 2024 to December 31, 2024 there is an exemption from the extra 2% for properties exceeding $3,000,000.
3. Employer Health Tax (EHT)
Effective January 1, 2024, the budget proposes to increase the EHT exemption threshold from $500,000 to $1 million. As a result, the notch rate for remuneration above the new $1 million exemption threshold and below the full rate $1.5 million threshold will increase from 2.925% to 5.85%. The EHT is imposed on wages paid by employers with a permanent establishment in the province.
4. Tax Rates
The BC Budget announces no changes to personal tax rates and corporate tax rates or the $500,000 small business limit.
