What is Property Tax and when do I pay it?
You pay Property Transfer Tax when you purchase or acquire an interest in a property. The tax must be paid when you register changes to a certificate of title with the Land Title Office. For example, a change may include adding or deleting a name from the title.
Property Transfer Tax is different from property tax. You pay property tax on an annual basis for services you receive from your local government, even if no money changes hands.
Property Transfer Tax Rates for Existing Properties (Re-Sale)
The amount of tax due depends on the fair market value of the property that is transferred:
If the fair market value is $200,000 or less, the tax is 1% of the fair market value.
If the fair market value is greater than $200,000, the tax is 1% of the fair market value up to $200,000, plus 2% on the portion of the fair market value that is greater than $200,000 up to $2,000,000. If the Purchase Price is over $2,000,000 the portion above $2,000,000 will be taxed at 3%.
- if fair market value of property is $150,000
- tax payable is: 1% of $150,000 = $1,500
First Time Home Buyers' Program
- if fair market value of property is $250,000
- tax payable is: 1% of $200,000 = $2,000
- plus 2% of $50,000 = $1,000
- for total tax payable of $3,000
Introduced in 1994, the First Time Home Buyers' Program is designed to help British Columbians purchase their first home. Under the program, eligible purchasers can claim an exemption from Property Transfer Tax if the fair market value of the home is less than the threshold amount.
Requirements for First Time Home Buyers' Exemption
The property you purchase qualifies if:
- you are a Canadian Citizen, or a permanent resident as determined by Immigration Canada,
- you have lived in British Columbia for 12 consecutive months immediately before the date you register the property, or you have filed 2 income tax returns as a British Columbia resident during the 6 years before the date you register the property,
- you have never owned an interest in a principal residence anywhere in the world at anytime, and
- you have never received a first time home buyers’ exemption or refund.
- the fair market value of the property is not more than the current threshold of $500,000,
- the land is 0.5 hectares (1.24 acres) or smaller, and
- the property will only be used as your principal residence.
If the property does not meet all of these requirements, you may still qualify for a partial exemption.
A proportional exemption is provided for eligible residences with a fair market value of up to $25,000 above the threshold (i.e. up to $525,000).
Partial Exemption Calculation if All Owners are First Time Home Buyers and Price is Over $500,000
If both owners are First Time Home Buyers and the Purchase Price is over $500,000 we use this example (Assume price is $510,000):
PTT = $200,000 x 1% + ($510,000-$200,000) x 2% = $8,200
PTT Exemption = ($525,000 – $510,000) = 60%
Purchaser pays full tax ($8,200) less 60% for a total of $4,920 in PTT
Partial Exemption Calculation if One or More Purchaser's Are NOT First Time Home Buyers
If one or more of the Purchasers don’t qualify, only the percentage of interest that the First Time Home Buyer(s) have in the property is eligible.
If you qualify and purchase a property with a fair market value under $500,000 (or under $525,000 using the calculation above) with a person that doesn’t qualify you would still qualify. If you owned a 60% interest in the property, 60% of the tax amount would be eligible for the exemption.
For example, if the Purchase Price was $425,000:
PTT = $6,500
% of Interest a First Time Buyer owns of the property = 60%
PTT Exemption = $6,500 * 60% = $3,900
PTT after Exemption = PPT - PTT Exemption = $2,600
Property Transfer Tax Rates for New Properties (Pre-Sale)
All buyers (whether first time buyers or not) no longer pay PTT on purchases of NEW homes up to $750,000 in value; note the buyer must be a Canadian citizen or a permanent resident and they must reside in the property as their primary residence for 1 year minimum from the Completion Date; there is a partial exemption for homes between $750,000 and $800,000.
A partial exemption is available where the fair market value is over $750,000 but less than $800,000. If the price is $800,000 or more, Property Transfer Tax is payable on the entire price. So if the price is $801,000, Property Transfer Tax applies on the entire amount, not just the last $1,000.
See the following example:
PTT amount x ($800,000 - Purchase Price) = X
PTT amount - X = Partial exemption amount
So the following would apply on a $759,900 Sale Price:
$13,198 x ($800,000 - $759,900) = $10,584.40 (savings)
$13,198 - $10,584.40 = $2,613.60 partial exemption amount
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