Top 5 Things to Know about Property Transfer Tax!
When purchasing a home as a new buyer, there are many costs that are not talked about, one of them being property transfer tax. It’s important to understand what this is, how it is calculated, and when you will have to pay it, to avoid any necessary surprises when purchasing a home.
1. What is Property Transfer Tax?
“You pay the tax based on the fair market value of the property (land and improvements) at the date of registration with the Land Title Office, unless you qualify for an exemption or purchase a pre-sold strata unit.”
Basically, PPT is tax on the property that you purchased, based on what you paid for it. To be clear, sellers do not pay the property transfer tax, rather buyers of the home have to pay as they are gaining an interest in the property upon title registration.
2. How is PPT Calculated?
The property transfer tax rate is:
- 1% on the first $200,000,
- 2% on the portion of the fair market value greater than $200,000 and up to and including $2,000,000,
- 3% on the portion of the fair market value greater than $2,000,000, and
- If the property is residential, a further 2% on the portion of the fair market value greater than $3,000,000 (effective February 21, 2018).
If the property is classified as residential and farm, or is residential mixed class (such as residential and commercial), you pay the further 2% tax on only the residential portion of the property.
Use the property transfer tax calculator to estimate the tax you owe based on the fair market value of your property.
3. When are you exempt from PPT?
As a first time home buyer there are some exemption. To help enter in to the market, the first time home buyer’s (FTHB) program gives an exemption to the property transfer tax in the case that you can qualify.
If this is your second, third, fourth home etc. you are not exempt from the tax.
You qualify for a full refund if:
- You are a Canadian citizen or permanent resident;
- You’ve lived in BC for 12 consecutive months before the date the property is registered; or
- You’ve filed 2 income tax returns as a BC resident in the last 6 years;
- You have never owned an interest in a principal residence anywhere, anytime; and
- You have never received a first time home buyers’ exemption or refund.
- Your property meets the exemption requirements as well.
Your property qualifies for a full refund if:
- The property has a fair market value that does not exceed $500,000
- The land is equal to or less than 0.5 hectares (1.24 acres)
- The property will be used as a principal residence.
You may qualify for a partial refund if:
- The property has a fair market value of between $500,001-$524,999. (is less than $525,000)
- The land is greater than 0.5 hectares.
- A portion of the land is used for commercial purposes or there are other homes on your land (only your primary residence is eligible).
4. Newly Built Homes Property Transfer Tax Exemption
The Newly Built Home Exemption reduces or eliminates the amount of property transfer tax you pay when you purchase a newly built home.
- a house constructed and affixed on a parcel of vacant land.
- a new apartment in a newly built condominium building.
- a manufactured home that is placed and affixed on a parcel of vacant land.
- an already constructed house that is removed from one parcel of land and affixed to another parcel of vacant land, as long as the house hasn’t been occupied since it was placed on the new parcel of vacant land.
- a house resulting from the division of an existing improvement affixed to a parcel of land that was also subdivided, as long as this house hasn’t been occupied since the subdivision of the parcel.
- a house converted from an existing improvement on the land. The previous improvement couldn’t have been used as residential (e.g. a warehouse converted into apartments).
If you qualify for the exemption, you may be eligible for either a full or partial exemption from the tax.
5. What about Vacant Land?
“If you purchased a vacant lot and paid the tax upon registration, you may apply for a refund if:
- You have a newly built home on the land
- You meet the qualifications for the Newly Built Home Exemption
- The fair market value of the land plus the cost of the newly built home is $800,000 or less
- You moved into your home and continued to occupy the property as your principal residence for the remainder of the first year.
If you move out before the end of the first year, you may be eligible for a partial refund of the tax you paid based on the number of days you occupied the property.
If the owner passed away, or the property is transferred because of a separation agreement or a court order under the Family Law Act before the end of the first year, you may still be eligible for a refund.”
Check out this blog post here to watch the 90 sec video about “First Time Home Buyer Exemption”.
For further information about the real estate market in Vancouver and current trends, contact Top Vancouver Realtor Leo Wilk.