by Sheila Henn, CPA, CA | Chartered Professional Accountant, SC Henn CPA –
Housing is playing a key role in the changes for taxes for this coming year. With the high interest rates and inflation, circumstances for people alter and it is best to be informed prior to any large decision. Whether looking to buy, sell or change the use of your home, there may be risks and opportunities.
First Time Home Buyers
Starting in April 2023, you can open a first home savings account (FHSA) and contribute up to $8,000 per year, up to $40,000. These contributions are deductible on a calendar basis. The RRSP Home Buyers’ Plan is also available. Other incentives include the BC Property Transfer tax exemption and the First Time Home Buyers’ Credit, now $10,000 (up to $1,500 credit). In 2023, B.C. has also introduced a renter’s tax credit of up to $400 per year for low-income individuals. Keep in mind that some of the above are available if you have not owned a house for several years.
Sale of your Home
The sale of a home is a significant event that should be discussed with your advisors. The principal residence exemption is a complicated area and not reporting on your tax return can bring high penalties. U.S. persons may also have tax as the rules are different when reporting on their U.S. return. Change of use for a house is also an area to consider. With the B.C. constraints of short-term rental restrictions in May 2024, some are choosing to sell, or their rental may now become their principal residence. The anti-flipping rule is now in effect, meaning you may have to report the sale of your home as business income, if selling within a year of purchase.
Other reporting
In 2023, bare trusts must file a trust return annually and additional disclosures are required. This may include an adult child who is on title for probate purposes, or a parent who is on title for financing. Other reporting such as Underused Housing Tax filing or the BC Speculation Tax may be required. Penalties for non-reporting relating to real estate can be high.
Purchasing a home or other life events such as moving into a care home, an inheritance or breakdown of marriage are also significant events. Starting your research and being prepared with your questions will help you make an informed decision. You should use reliable online resources and consulting professionals ahead of time is best practice. Bring any changes to your tax accountant and other advisors as soon as possible. Professionals are available to help.
For more information, email sheila@schenncpa.ca.
