18 Feb BC Home Flipping Tax: What You Need to Know
The British Columbia government is introducing the BC Home Flipping Tax, effective January 1, 2025. This tax is designed to discourage rapid property turnovers that may contribute to rising housing costs by taxing profits from the sale of residential properties held for less than two years.
Key Features of the BC Home Flipping Tax
Who Does This Tax Apply To?
The tax applies to individuals, corporations, partnerships, and trusts that sell or dispose of a taxable property on or after January 1, 2025, if the ownership period is less than 730 days (two years).
- Properties purchased before January 1, 2025, but sold after the effective date will be subject to the tax if held for less than two years.
Which Properties Are Taxable?
The tax applies to:
- Residential properties with housing units
- Properties zoned for residential use
- Rights to acquire residential properties, including assignments of purchase contracts for pre-sale condos
Tax Rates
- Properties sold within 365 days of purchase: 20% tax on net taxable income
- Properties held between 366 and 729 days: Gradual reduction in the tax rate, decreasing to 0% at 730 days
Exemptions
Certain life circumstances may qualify for exemptions from the BC Home Flipping Tax, including:
- Death of a property owner
- Divorce or separation
- Serious illness or disability
- Job loss or involuntary termination
- Relocation for employment or education
- Changes in household size, such as birth or adoption
- Bankruptcy or foreclosure
- Delays in new housing construction
Some exemptions require filing a BC Home Flipping Tax return within 90 days of the sale, while others do not. Sellers should review the official BC guidelines to determine the correct process.
How Is the Tax Calculated?
- Determine Net Taxable Income
- Sale price minus purchase price, selling costs (such as legal fees and commissions), and improvement costs.
- Apply the Tax Rate
- The tax rate is determined by the ownership period (see tax rates above).
Example Calculation
- Property purchase price: $625,000
- Sale price (after 364 days): $900,000
- Selling and legal costs: $25,000
- Net taxable income: $250,000
- Tax rate (20%): $50,000 tax payable
Filing Requirements
Sellers subject to the tax or claiming exemptions must file a BC Home Flipping Tax return within 90 days of the sale. Late filings may result in penalties.
How Does This Compare to Federal Property Flipping Rules?
The BC Home Flipping Tax is separate from the federal property flipping rules introduced in 2023.
- Both are designed to discourage speculative property sales.
- Each operates independently, with different criteria and enforcement measures.
What Does This Mean for Property Owners?
The BC Home Flipping Tax represents a significant change in how short-term property transactions are taxed, aiming to promote housing stability and affordability.
For guidance on how this impacts your property sales, contact your Clearline CPA representative today for expert advice.
