Vancouver Real Estate Blog

Finance Minister Kevin Falcon Scraps HST And Returns PST

B.C. will scrap the HST and return to the PST on April 1 2013, Finance Minister Kevin Falcon announced on Friday in Victoria.

Until that time new home buyers will be able to take advantage of expanded rebate program and a transitional tax designed to ensure that there is no tax difference whenever they choose to buy their home — provided it costs $850,000 or less.

"The B.C. new housing rebate threshold will be increased to $850,000, meaning more than 90 per cent of newly built homes will now be eligible for a provincial HST rebate of up to $42,500," said a statement issued by the Ministry of Finance on Friday.

"The housing transition rules help ensure when people buy a newly constructed home under the PST, whether built entirely under the HST, entirely under the PST, or partly under HST and partly under the PST, they will all pay a consistent and equitable amount of tax."

The government also rolled out a new grant designed to encourage people to buy vacation homes outside of Metro Vancouver and Victoria.

"In addition...purchasers of new secondary vacation or recreational homes outside the Greater Vancouver and Capital regional districts priced up to $850,000 will now be eligible to claim a provincial grant of up to $42,500 effective April 1, 2012."

Falcon said he expects the new rules will bring certainty to new home buyers and the building industry.

"The relief measures announced today are a boost to home buyers purchasing either a new primary residence or a secondary home. At the same time, they help an important job-creator in all parts of the province."

The move was welcomed by the homebuilding industry on Friday.

More details on how the transition back to the PST will affect other goods and services will be rolled out later this spring.

"For goods and services that will be subject to PST, PST will generally apply where tax becomes payable on or after April 1, 2013."

Taxes - How Much Do They Add To The Purchase Of A New Home???

The Property Transfer Tax (PTT) adds $15,884 to the average price of a detached home in Greater Vancouver (estimated at $894,210). While there is a rebate for qualifying first-time buyers, the home must be priced below $425,000 and there is a proportional exemption for homes priced up to $450,000.

The Harmonized Sales Tax on a new home adds 12%, with 7% of that amount being due to harmonization. There is a rebate of up to $26,250 for qualifying homes.

The total: taken together, total taxes on a new home in Vancouver amount to $123,189 – which brings the cost of that $894,210 home to $1,017,399.

However the government does provide rebates and exemptions to property buyers and owners.

Vancouver and British Columbia's Property Transfer Tax (PTT) and Harmonized Sales Tax(HST) adds up

British Columbia's Real Estate sales have slowed in recent months. Some think it is due to the tax system on the purchase of a home. While others believe it is just the cyclical cycle of the market. Well, I believe it has more to do with the market than taxes, however I will point out that taxes can and will take a bite out of the fun of purchasing real property in British Columbia, especially here in Vancouver. For example the average price of a home in Greater Vancouver($894,210) attracts $16,000 of PPT to a home. This sum is almost the same amount that most First Time Buyers have as their deposit. So when you look at it in that light, this tax really adds up.

The Harmonized Sales Tax (HST) as everyone knows is something that has got alot of British Columbians up in arms over. Just talk to PAST Premier Gordon Campbell who resigned yesterday over this mounting issue. Before moving ahead, I want to make clear that the HST is only on NEW HOME SALES. So the impact of the HST before the $26,250 rebate is just over $107,000. So when you add the PTT + HST - Rebate = $97,000 approximately. That equals  about 11% above the purchased property price and has a dramatic impact on purchasers in the Vancouver local market.

 

Deferring taxes Property Taxes

The BC Government helps property owners who are unable to pay annual property taxes and are at risk of losing their homes. After deducting the Home Owner Grant, home owners can postpone paying all or part of the unpaid balance of their residential property taxes if they qualify for one of three low-interest tax deferment assistance programs.

Property Tax Deferment Program for seniors: property owners aged 55+, a surviving spouse or a person with a disability who are Canadian citizens or permanent residents under the Immigration Act (Canada) may qualify if they maintain a minimum equity of 25% of the current assessed value as determined by BC Assessment, if they have lived in BC for one year, if they occupy their home as a principal residence, and maintain a fire insurance policy on their home.

Financial Hardship Property Tax Deferment Program: low-income property owners with least 15% equity in their home who are Canadian citizens or permanent residents and have lived in BC for at least one year and occupy the home as a principal residence, may qualify.

Property Tax Deferment Program for Families with Children: qualifying home owners financially supporting a dependent child under age 18, who have at least 15% equity in their home, are Canadian citizens or permanent residents and have lived in BC for at least one year and occupy the home as a principal residence, may qualify.

Five misconceptions about property taxes.

Five misconceptions about property taxes:

1. You can appeal property taxes. No. You can appeal your assessment, not your taxes. You receive your assessment annually the first week of January and must appeal by January 31.

2. An appeal will change the market value. The market value may not correlate to the assessed value. BC Assessment typically assesses properties as of the previous July 1. A REALTOR® valuing a home many months later at the time of the appeal may find a number of factors have affected the value, for example, the market in a particular neighbourhood has changed or the land has been rezoned.

3. If you just bought a home, the previous owners are liable for taxes. No. When you buy a property you become liable for all outstanding taxes.

4. New home owners can claim the Home Owner Grant. No. New home owners cannot claim the Home Owner Grant if the seller paid the taxes or if the new home owner claimed a grant on another property.

5. You haven’t claimed your Home Owner Grant for a few years and you want to claim it all now. You’re out of luck. You can claim the grant amount only for the previous year.

Home owners get hit with the end of the Provincial Sales Tax Rebate and the 7% increase charged by HST.

Harmony Sales Tax is no harmony for those that are in the midst of a huge renovation or even worse a replacement of the envelope of their building. With the coming of July 1st 2010 deadline, home owners are starting to realize that their reconstruction work on their leaky condo or for that matter a home or a strata complex that just needed to update their look is now facing an additional 7% on top of the already expensive engineering and building costs. As the new HST looms nearer, the PST rebate that the British Columbia government sponsored for repairs slips under ground and ends all rebates for recouping some costs for home owners.

Some councils and strata complexes are out $10,000 even $100,000's of dollars as they will be paying much more due to the HST and will get significantly less back as a result of the PST rebate ending on June 30th.

Property Transfer Tax, Where is it now and how does it apply in todays Real Estate Market.

The Property Transfer Tax was introduced in 1987. It established that 1% of the 1st $200,000 and 2% on the balance of any property in British Columbia would pay this tax to the government. Back then, it was considered a "Wealth Tax". Because it only accounted for 5% of the homes sold would have to pay the additional 2% on anything above $200,000.

Today however is a totally different story. 2009 figures tell a much different story and how much the government makes on this tax. 2009 figures estimates that 88% of those buying a home are paying the extra 2% (Wealth Tax) on every $100,000 over the base rate, established in 1987.

www.bcrea.bc.ca/sheltertaxes/propertytransfertax.htm

Harmonize Sales Tax - Decreases affordability

 To help mitigate the effects of the HST, the Real Estate Board of Greater Vancouver made five recommendations to the provincial government in a presentation to the Selection Standing Committee on Finance and Government Services on October 16, 2009.

To read BCREA full submission visit: Learn more >>

Harmonized Sales Tax

The BC Government has announced that it will exclude new homes costing up to $525,000 from its proposed 12 per cent Harmonized Sales Tax (HST) scheduled to take effect July 1, 2010.

The government has also increased the rebate of the provincial portion of the HST paid on a new home to a maximum of $26,250.

This represents a 30 per cent increase over the original government proposed home price threshold of $400,000 and maximum rebate of $20,000.

A similar rebate will also support the construction or substantial renovation of affordable rental housing.

The government has released its proposed Residential Housing New Housing Rebates and Transitional Rules for British Columbia HST, which provides details on new housing rebates including transitional rules for real property. This includes:

Transitional rules: the HST would not apply to sales of new homes where ownership or possession is transferred before July 1, 2010;

Grandparenting: sales of new homes under written agreements of purchase and sale including presales entered into on or before midnight November 18, 2009, would generally not be subject to the provincial portion of the HST, even if both ownership and possession are transferred on or after July 1, 2010. Any home sold on or after November 19, 2009 is subject to HST transitional rules.

For a copy of the new Transitional Rules, visit: http://www.sbr.gov.bc.ca/business/Consumer_Taxes/Harmonized_Sales_Tax/HST_Transitional_Rules.html