Proposed Home Flipping Tax in British Columbia
The government of British Columbia has proposed a new tax on home flipping, scheduled to take effect on January 1, 2025, pending legislative approval. This tax targets gains from real estate transactions in British Columbia where the property, including presale contracts, is sold within two years of purchase.
Distinct from federal regulations, this provincial tax aims to curb speculative real estate transactions by imposing a tax on profits from short-term property sales.
Tax Applicability
The proposed tax will affect both residents and non-residents of British Columbia who sell their property after January 1, 2025, if the property was purchased less than two years prior to the sale. Notably, properties bought before January 1, 2025, will also be subject to this tax if sold within two years of purchase, unless exempted.
Exemptions
Exemptions in the draft legislation include:
- Lands owned by certain First Nations;
- Entities such as First Nations, registered charities, or municipal entities;
- Life circumstances including death, serious illness, divorce, bankruptcy, expropriation, and foreclosure;
- Transactions between related parties;
- Properties used commercially or developed by the seller;
- Renovations or construction that add housing units.
For a comprehensive list of exemptions, visit the official government site [here](https://www2.gov.bc.ca/gov/content/taxes/income-taxes/bc-home-flipping-tax/exemptions).
Relevant Properties and Contracts
The tax applies to residential properties and the assignment of presale contracts. The acquisition date for presale contracts is considered the date the contract was initially signed, and this date does not reset with the completion or assignment of the contract.
Tax Calculation
The Home Flipping Tax is calculated on the net taxable income from the sale of a property owned for less than two years. The rate is 20% on income derived from properties sold within 365 days. After 730 days, the property is no longer subject to this tax.
Net taxable income is determined by subtracting the cost of acquisition and any eligible improvement costs from the sale proceeds.
Primary Residence Deduction
Sellers of their primary residence may deduct up to $20,000 from their taxable income if:
- The property was owned for at least 365 days prior to sale;
- The seller lived in the property as their primary residence during ownership.
This deduction is not available for the assignment of presale contracts.
This new tax structure is part of British Columbia's effort to stabilize the housing market by discouraging rapid turnover of properties for profit.
