The upcoming empty home tax and what it means for you
The recent victory of the Liberal party in Canada’s elections has confirmed what most Canadians knew was on the horizon since 2019, empty home tax. Toronto and possibly other regions of Canada will be following in Vancouver’s footsteps to implement an empty home tax that affects Canadian homeowners who own multiple properties. Investing in secondary properties has been the top choice for many Canadians looking to make a profit. Many homeowners and potential homebuyers are wondering if the upcoming empty home tax will significantly affect their finances.
What is the empty home tax?
The empty home tax requires homeowners who own a property they have not lived in for a specified period to pay a tax. The taxable amount is calculated as a percentage of the total taxable value of the house. This tax does not apply to primary residences and rented or leased secondary homes.
It’s important to note that there is existing precedence for an empty home tax in Canada. The Vancouver empty home tax has been in effect since 2020. It requires all homeowners in Vancouver to make an empty home tax declaration for any homes that have not been occupied for longer than 6 months consecutively throughout the year. The empty home tax rate in 2020 was 1.25% of the property’s assessed taxable value; however, it has now increased to 3%.
The city of Toronto has been considering implementing a similar tax policy. In 2019, the City Council proposed a Toronto vacant home tax. The plan was approved in the summer of 2021. The policy details are expected to be ironed out by the end of 2021 and will likely come to light at the beginning of 2022.
Why is an empty home tax being implemented now?
It has become harder for potential homeowners to find homes, especially in markets like Vancouver and Toronto. The government of Canada firmly believes that vacant homes are one of the major contributing factors to this phenomenon. In regions like Vancouver and Toronto, a house represents a monetary asset and a valuable living space in some of Canada’s most densely populated areas. Implementing the empty home tax is intended to stimulate homeowners to rent, lease, or sell their homes, allowing Canadians to find affordable housing options.
Additionally, an annual federal-level tax is also being considered for empty homes owned by non-Canadians and non-residents. This tax is based on the reasoning that Canadian real estate is not intended as a ‘passive investment vehicle’ for those that don’t reside within the country. Instead, residents should use it for residential purposes to alleviate housing and living space demand.
Are there exemptions to the empty home tax?
It is difficult to say whether there will be ways to exempt yourself from the empty home tax since the specifics for Toronto have not been spelled out. However, we have an example in the Vancouver empty home tax, which provides guidance. Here are some of the categories under which a homeowner can file for an exemption to the empty home tax:
- The registered owner has passed away
- The home is undergoing major renovations
- The registered owner was under medical care
- The house was in the process of being sold
- A court order prevented occupying the home
There are a few more fringe categories that only apply in particular cases.
What does the empty home tax mean for Toronto citizens?
While many homeowners are worried about how the empty home tax will jeopardize their investments, the fact is that a vacant home is an opportunity. Renting or leasing an empty house is an efficient way to gain appreciation value and rental income. In addition, the empty home tax is also an opportunity for prospective homeowners to snag their dream home. Many investment property owners may be disinterested in paying taxes on their investments and would rather sell them, increasing the supply of homes.
If you’re interested in capitalizing on this opportunity but lack the funds to make a down payment or monthly payments, Alpine Credits can help you secure the funding you need. We have many funding solutions that can fit your requirements. Contact us today to get a free quote and see how you can turn the upcoming empty home tax into a profitable opportunity.