With the provincial election less than a week away the Real Estate Board of Greater Vancouver is making reduction in the BC Property Transfer Tax a high priority issue among candidates. In today’s blog post I’ll cover how the BC Property Transfer Tax started, how increases in its threshold can save home buyers money and outline exemptions of the Property Transfer Tax for first time home buyers, divorces, families and more.
BC Property Transfer Tax History
The Property Transfer Tax Act British Columbia was implemented in 1987 as a form of wealth tax. The rates were the same as today: 1% of the first $200,000 of the sale and 2% of the remainder of the transfer.
At the time it was implemented only 5% of Greater Vancouver homes for sale were more than $200,000. Today that percentage has flipped – less than 5% of Greater Vancouver homes for sale are $200,000. Approximately 96% of residential Greater Vancouver properties are priced above $200,000 meaning home buyers are paying significantly more of this ‘wealth tax’ simply because home price have naturally gone up in the last three decades.
Should the Property Transfer Tax threshold be increased?
Recently the Real Estate Board of Greater Vancouver (REBGV) has made reduction of the BC property transfer tax its top issue in the provincial election.
They propose the idea that the 1% threshold should be increased up to $525,000. The savings for home buyers would be fairly significant. Consider a $600,000 home for sale in Surrey:
1% tax on first 525,000 = 5,250
2% tax on remaining 75,000 = 1500
Total property transfer tax amount = 6,750
Under the current property transfer tax BC the transfer tax amount would be $10,000. The proposed increase in threshold would save homebuyers $3,250.
The cost to the government, however, would be much more significant if the tax rate were to be reduced. In the 2012/13 fiscal year property transfer tax generated $780 million and over the last 26 since it was introduced it has raised $11.9 billion in revenues for our provincial government.
If you want to play around with numbers some more here is a quick and easy to use Property Transfer Tax Calculator tool to see different tax rates on various listing prices.
Property Transfer Tax Exemption for
First Time Home Buyers
Introduced in 1994, the First Time Home Buyers’ Program in British Columbia was created to help people buy their first home. Eligible first time home buyers are still exempt from Property Transfer Tax
To qualify for Property Transfer Tax first time home buyer exemption you must:
- Be a Canadian citizen or a Permanent Resident
- Have lived in BC for 12 consecutive months prior to registering the property OR have filed 2 income tax returns in the last 6 years prior to registering the property
- Have never owned an interest in a principal residence anywhere in the world
- Have never received a first time home buyers’ exemption or refund.
In order to be eligible for a full exemption the fair market value of the property must not be more than $425,000, the land must be less than 0.5 hectares and the property will be used as your principal residence.
For more information on the Property Transfer Tax exemption for First Time Buyers or for more information on how to apply for the exemption visit this Ministry of Finance Tax Bulletin.
Additional Property Transfer Tax Exemptions
Some of the more common additional exemptions to property transfer tax in British Columbia include:
- Transfers following bankruptcy
- Transfers resulting from marriage breakdowns (the “property transfer tax divorce” exemption)
- Transfers to registered charities
- Transfers under the Veteran’s Land Act
Read more about Property Transfer Tax Regulations including the details of qualifications for exemptions plus see the exemptions under Property Transfer Tax Code 5 for when a related individual transfers a principal residence to you.
Closing Remarks on the BC Property Transfer Tax Rate
What do you think about the Property Transfer Tax in British Columbia? Does this deter you from buying a new home? Do you think the thresholds should be increased to account for average prices of homes for sale in Vancouver?
If you have any questions about Property Transfer Tax or anything else real estate related in Greater Vancouver, Surrey or White Rock area I’d love to speak with you. Call me at 778-316-4290 or email me at firstname.lastname@example.org.