If you are looking at purchasing a home, it is important to be aware that your initial home price will not be the final cost of your home. This is due to the additional fees that come alongside purchasing a home, such as property transfer taxes. However, it is possible that you may qualify for an exemption that will save you from the property transfer tax cost. Continue reading to learn about common property transfer tax exemptions, pitfalls that may negate an exemption, and why the property tax exemptions forms require our social insurance number.
What are Common Property Tax Exemptions?
When purchasing a property it is important to create a budget for additional fees such as property transfer taxes. However it is also important to do your research as you may qualify for an exemption. There are specific requirements that must be met with each exemption, for example the first time home buyers exemption requires the homeowner to be a B.C. citizen and for the property to be used as a personal residence that costs below $500,000, and is less than 1.24 acres. Another example is the exemption for newly built homes, where if the property will be used as the homeowner’s residence, costs below $750,000 and meets the size and residency requirements, the property tax will be exempt. Other exemptions also may apply if you are transferring a property between yourself and spouse, or self to a child. Check to see if you qualify for an exemption and ensure you are budgeting for property transfer tax and other additional fees that may apply.
What are Pitfalls that Could Negate a Property Transfer Tax Exemption?
There are several potential pitfalls that may negate a property tax exemption, therefore it is best to double check with your legal representative, lawyer or notary to ensure you qualify.
Homeowners may assume that they can qualify for an exemption yet each requirement must be met in order for the exemption to apply. For example, there is an exemption when transferring a home from a parent to a child, yet the home must be less than 1.24 acres and the personal residence of the parent or child for a minimum of 6 months prior to the transfer. If these requirements are not met, the exemption will not apply. Another pitfall that homeowners may run into when applying for the first time home buyers exemption, is never having owned a residence anywhere else in the world that they have lived in. You would no longer qualify for the first time home buyers exemption in this case.
There are other exemptions with specific requirements, such as the spousal exemption, which allows one spouse to transfer an interest in their residence to the other spouse. Requirements for this exemption include being married or in a marriage-like relationship for two years. If a couple is common law, they must prove that they have been living together for at least two years. This can simply be shown by providing an updated driver's license or service card that reflects your shared address. It is crucial that you can provide evidence of your living situation and it is important to be honest and truthful in your representation when discussing whether you qualify for the exemption with your lawyer or notary.
If the property transfer tax department discovers that you do not qualify for an exemption, even for an innocent mistake, there will be penalties against you that may result in extra charges. It is important to double check with your lawyer or notary as to whether you qualify for any exemptions before assuming you do.
Why Does the Property Transfer Tax Form Require our Social Insurance Number?
Over the last few years, property transfer tax forms have been updated as per the latest government regulations. However, this has left many Canadians wondering why they are being asked for their social insurance number for every transaction. This is because the government uses your social insurance number to confirm your Canadian residency, as foreigners are charged a 20% foreign buyers tax.
Michael Dupuis is a proud associate at CBM Lawyers LLP, specializing in business and real estate law. Reach out to Michael or a member of our team to learn more about filing Landowner Transparency Registry. Contact Us Today!
