The BC government has proposed a home flipping tax (the “Home Flipping Tax”) scheduled to take effect on January 1, 2025, pending approval by the legislature. This tax will apply to income from the sale of a property, including presale contracts, in British Columbia if the property was owned for less than two years.
The Home Flipping Tax is distinct from federal property flipping rules and is not aligned with or administered by the federal or provincial governments. Income Tax. Its primary aim is to discourage short-term property holding for profit.
Who is subject to the Home Flipping Tax?
The Home Flipping Tax applies to B.C. residents and non-residents who sell their property on or after January 1, 2025. Tax will be payable on any gain or income earned from the sale of the property if the property was purchased less than two years before the sale, subject to any exemptions.
Notably, the legislation includes a provision that properties purchased before January 1, 2025, may be subject to the tax if sold on or after January 1, 2025, and have been owned for less than two years, unless an exemption applies.
How is the Flipping Tax Calculated?
The Home Flipping Tax applies to the net taxable income from the sale of taxable property that was owned for less than two years.
The tax is calculated by multiplying your net taxable income by your tax rate. Net taxable income is your taxable income minus the primary residence deduction. Taxable income is calculated as your proceeds from the sale of the property minus the cost to acquire the property and any eligible costs paid or payable by you to improve the property while you own it.
The tax rate is 20% of the income earned from a property sold within 365 days. After 730 days, the tax no longer applies.
Exemptions
Please note the following exemptions listed below:
Certain exemptions contained in the legislation apply to:
- Certain First Nations land;
- Certain entities (such as a First Nation, a registered charity, or a municipal entity).
Exemptions based on life circumstances, including:
- Death, serious illness, and divorce;
- Bankruptcy, expropriation, and foreclosure.
Transactional exemptions, such as:
- Related party transactions;
- Commercial use and developer exemptions;
- Renovation or construction of additional housing units.
Please note that the list above is for illustrative purposes only and is not exhaustive. For a complete list of exemptions, please refer to the following link: https://www2.gov.bc.ca/gov/content/taxes/income-taxes/bc-home-flipping-tax/exemptions
Relevant Properties:
The Home Flipping Tax applies to residential properties and presale contracts. It also covers assignments of presale contracts.
Presale Contracts:
The original buyer of a presale contract (i.e., the person who purchased the contract from the developer) will be considered to have acquired the contract on the date the presale contract was entered into.
An assignment buyer of a presale contract (i.e., a person who acquired the presale contract from another person) will be considered to have acquired the contract (or the eventual unit) on the date the assignment was completed.
Completing the presale contract does not reset the clock for the Home Flipping Tax.
If the presale contract is assigned within two years of the date it was entered, the Home Flipping Tax will apply.
In other words, for the two-year window in the Home Flipping Tax, the relevant starting date is when the person acquired their right in the unit.
