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Taxes, taxes and more taxes on real estate in BC

By
Real Estate Agent with Century 21 Coastal Realty Ltd.

Tax is a big subject in BC right now with the iimplementation of HST.   Most buyers were already confused by the amount of taxes adjusted on a Statement of Adjustments even before our Provincial Government was taking a bigger slice of the pie.  

You must ensure that you have sufficient funds to close including all the taxes that will be adjusted.    As an example if you are buying a new home for $450,000.00 you will now be charged HST comprised of 5% GST - Federal Government and 7% Provincial Harmonized Tax for a total of 12%,   You will also be charged the Property Transfer Tax (1% of the first $200,000.00 of the purchase price and 2% on the balance - again, to the Provincial Government), and there will be an adjustment for Property Taxes (payable to the City of Municipality).  

So in order to close on your purchase of $450,000.000 you will also need:  

12% - $22,500.45 grant (Provincial New Homeowner grant only) = $31,499.55

PTT  - $7,000.00

Municipal tax adjustment will depend on whether the Seller has already paid the yearly taxes.   It will be prorated either in your favour if you are to pay, or in favour of the Seller if they have already paid.   Even though our property taxes are due in July they are for the calender year in which they are paid.   A lot of first time homebuyers make the mistake of thinking that taxes run July to July and think they have a full year before they are due.   Not true, so be prepared for an adjustment based on the calender year.  

That means when you are saying to your Realtor that you want to purchase a new home for around $450,000.00 you will need approx. $490,000.00 to close.   

The following rebates/grants are available in British Columbia:  

GST REBATE:  If you are buying new then be aware that a Federal New Homeowner grant is available on new homes priced below $350,000.00 based on 36% of 5% of the purchase price or on a graduating scale from $350,000.00 to $450,000.00 (you or a relative must be moving to the property to qualify).    The Seller MAY credit this to the Buyer at the time of purchase and the Buyer would assign the rebate to the Seller.

HST REBATE:  The grant available on the Provincial portion of the HST (being 7% of the purchase price) is based on a straight calculation of 71.43 percent of the 7% to a maximum of $26,250.00.  There is no ceiling for claiming this grant (you or a relative must be moving to the property to qualify).  The Seller MAY credit this to the Buyer at the time of purchase and the Buyer would assign the rebate to the Seller.  The Seller MAY credit this to the Buyer at the time of purchase and the Buyer would assign the rebate to the Seller.

TRANSITIONAL REBATE:   This is a temporary rebate available to compensate for any homes built, or partially built prior to the implementation date of the HST that are deemed to have PST embedded in the purchase price.   There is no other qualifying factor and is therefore available regardless of the intent for the purchase of the property.   It is not available on condos or townhouses.    There are two methods of calculation by either price or square footage and the amount of the grant is the greater of the two.    (see my previous writeup on HST for the formula's) http://activerain.com/blogsview/1801467/british-columbia-s-hst-on-new-housing-made-simple-  The Seller MAY credit this to the Buyer at the time of purchase and the Buyer would assign the rebate to the Seller.

PROPERTY TRANSFER TAX EXEMPTION FOR FIRST TIME HOMEOWNERS:   If you are a first time homebuyer and qualify for the first time homebuyers exemption of the Property Transfer Tax the ceiling price of your purchase before taxes must be below $425,000.00 for the full exemption and between $425,000.00 and $450,000.00 for a prorated exemption.   There is no exemption available if the purchase price is over $450,000.00 and this exemption cannot be carried forward.   It must be used on the first home registered in your name and you must live there for at least one year.   If you have previously owned investment property but never lived there you would still qualify for the exemption but be prepared to provide proof since every application is followed up on and the fine is to double the exemption amount claimed.    If you do move before the one year the amount of the exemption is prorated and you are billed for the portion of the year remaining at the time of your sale.

PROPERTY TAX HOMEOWNER GRANT:    This is the annual Homeowner Grant available on your property taxes.    In 2010 the amounts were $570.00 for those under 65 or $865.00 if you are a senior.    This grant can be claimed only once in a calender year on a home in which you live and only once on any given property.    When buying after the deadline for payment of taxes this grant has likely already been claimed on the property purchased.   If not, and you have not claimed the grant on any previously owned property in the calender year and the property qualifies (assessment must contain a value for improvements) then you can make an application to the City or Municipality for the grant to be credited to the tax account.  

When buying a new home be sure to review the taxes involved with your Real Estate Professional or your Mortgage Broker to ensure that you understand what your closing costs will be taking all the taxes into account before signing your offer.   

 

 

Posted by

I will do what it takes to earn your trust.  I am not just looking for "a deal", I am looking for lifelong clients who will use me for all their real estate needs for years to come and wouldn't hesitate in recommending me to family and friends.  Give me a call if you are thinking of buying or selling real estate in Delta, Surrey, White Rock or Langley, BC.  

Diane Friesen
Century 21 Coastal Realty Ltd.
Realtor in Delta, Surrey, White Rock and Langley, BC
(604) 866-5944
www.OnlyYourNeighbourhood.ca

Show All Comments Sort:
Malcolm Johnston
Century 21 Lanthorn Real Estate LTD., Trenton, Ontario - Trenton, ON
Trenton Real Estate

Wow, that sounds almost as confusing as the tax situation in Ontario. Why does everything have to be so hard?

Sep 18, 2010 06:48 AM
Peter Pfann @ eXp Realty Pfanntastic Properties in Victoria, Since 1986.
eXp Realty, Victoria BC www.pfanntastic.com - Victoria, BC
Talk To or Text Peter 250-213-9490

Hi Diane,

Wow, great information, and great job in putting it together. The whole HST thing still confuses the heck out of me.

one day we will figure out that about 20-25 % of the cost buying a property sits in taxes, fees and levies. Once this HST challange here is taken care off, what is stpping government to add it to all housing.......?

What will they waste all the extra revenue on.......Happy Selling

 

Sep 18, 2010 03:59 PM