BC home flipping tax
The British Columbia (B.C.) government has introduced the Residential Property (Short-Term Holding) Profit Tax, commonly known as the Home Flipping Tax, effective January 1, 2025. This measure aims to deter speculative real estate activities that contribute to housing affordability challenges.
Key Features of the Home Flipping Tax:
- Applicability: The tax targets profits from the sale of residential properties held for less than two years. It applies to properties zoned for residential use, including mixed-use properties with a residential component, as well as assignments of contracts, such as presale condominium agreements.
- Tax Rates:
- Properties Sold Within 12 Months: A 20% tax is levied on the net income from the sale.
- Properties Sold Between 12 and 24 Months: The tax rate decreases proportionally, reaching zero after 24 months of ownership.
Exemptions:
Certain life circumstances exempt sellers from the Home Flipping Tax, including:
- Change in Marital Status: Sales due to divorce or separation.
- Employment Relocation: Job relocations necessitating a move.
- Health Considerations: Sales prompted by medical conditions.
- Death: Transactions following the owner’s death.
- Additions to Housing Supply: Creating new rental units, such as accessory dwelling units.
Calculation of Taxable Income:
The taxable income is calculated by subtracting the property’s purchase cost and any capital improvements from the sale proceeds. For primary residences held for at least 365 days, a deduction of up to $20,000 may be available.
Implications for Property Owners and Investors:
This tax is designed to curb short-term speculative activities in the real estate market, promoting housing stability and affordability. Property owners and investors should consider the holding period of properties and be aware of potential tax liabilities when planning transactions.
For detailed information and specific scenarios, refer to the B.C. government’s official page on the Home Flipping Tax.