12/30/2024
Starting January 1, 2025, the new BC Home Flipping Tax will add another layer of tax consideration for British Columbians who sell residential property within a short timeframe. This tax will be in addition to the existing federal property flipping tax introduced by the Canada Revenue Agency (CRA) in 2023.
Here’s a breakdown of both taxes to help REALTORS® be aware of tax considerations and know when to guide their clients to seek professional advice.
The BC Home Flipping Tax (Effective January 1, 2025)
The new BC Home Flipping Tax will be imposed in addition to the federal tax, specifically targeting short-term property sales within British Columbia. Here’s how it works:
• The tax applies to income from sales of residential properties, presale contracts, or assignments owned for less than 730 days (two years). This includes properties bought before January 1, 2025, if they are sold on or after that date and owned for less than two years.
• The rate is 20 per cent for sales within the first 365 days of ownership, gradually decreasing until it is eliminated at 730 days.
• This tax applies to any person or entity (individual, corporation, partnership, or trust) selling property within BC, regardless of residency.
• Exemptions include certain primary residences, though exemptions are subject to specific conditions and filing requirements.
The Federal Property Flipping Tax (Effective January 1, 2023)
The federal property flipping tax rule, in effect since January 2023, applies to gains from the sale of a property owned for less than 365 consecutive days. Under this rule:
• Gains are treated as business income rather than capital gains, resulting in full taxation at the individual’s tax rate.
• Principal residence exemption generally does not apply if the property is flipped, meaning it is no longer automatically tax-exempt if sold within the short period.
• Certain life events exempt property sales from this rule.
Understanding the Two Taxes
Both the BC Home Flipping Tax and the federal property flipping tax are designed to target income earned from short-term property sales, but they differ significantly in terms of applicability, administration, and exemptions.
Aspect Federal Property Flipping Tax
BC Home Flipping Tax
Effective Date January 1, 2023 January 1, 2025
Scope Applies to properties held for less than 365 days Applies to properties held for less than 730 days
Tax Treatment Gains taxed as business income (no capital gains treatment) Additional 20 per cent tax on gains within first 365 days, decreasing to 0 per cent at 730 days
Exemptions Some exemptions for life events (death, marriage breakdown, serious illness, eligible relocation) Certain exemptions may apply under the BC Home Flipping Tax. Some exemptions apply automatically, while others require filing a tax return within 90 days of the sale.
Administration CRA Province of British Columbia
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