A blooming and growing real estate market can incredibly uplift the economic condition of a country. However, to combat the complexities and vacancy rates in the rental market, the federal and local governments introduce the Empty Home Tax.
Vancouver was the first major Canadian city to adopt the empty home or vacancy tax. Other cities like Toronto and Ottawa have considere implementing this tax from 2022 to increase the occupancy rate of the residential buildings.
However, understanding the empty home tax inclusions and exceptions can be tricky. Other empty home tax processes, such as declaration audits and the definition of a vacant home, involve certain intricacies. Therefore we have develop a well-structure guide to help you understand the concept of the Empty Home Tax and how it works in Canada.
Visit this link to get insights about the upcoming empty home tax regulations.
Table of Contents
What is the empty home tax?
The empty home tax is applicable for all residential structures that remain unuse as the owner’s principal or secondary residence within a period of 6 or more months.
The current recommend tax rate in Toronto, Ottawa and other cities is 1% of the residential properties’ market value in the previous year. In Vancouver, the empty home tax rate is 3% of the property’s market value.
The register residential homeowners will have a stipulate timeline to declare the status of their primary home or the presence of any secondary homes. Declaring the occupancy status within the deadline prevents a penalty. In case the occupancy status is not declare within the final deadline, the structure is consider vacant, and you’ll need to pay the empty home property tax.
How does the vacant property tax work?
To ensure the Canadian housing industry is not adversely affect by ongoing price hikes and rent increases by property owners, the government has introduce a 1% empty house tax.
- The tax value will depend on the one percent of the residential property’s market value assessment for the entire duration the property remains unoccupy.
- The empty home tax applies to non-Canadian property or residential real estate owners.
- You will be exempt from paying the vacancy tax if your residential structure has been occupy by you, a register tenant, or your family members for more than six months in the previous tax year.
- The property declaration status undergoes an audit to ensure the declarations are accurate. The first declaration can attract a hefty penalty and additional tax deductions.
- The empty home tax was particularly introduce to prevent excessive pricing in dense urban areas and the easy availability of rent properties.
How to declare empty home tax?
Any register residential property owner exempt from empty home tax does not need to declare their unuse property. Instead, you will need to show relevant documentation that makes your property valid for exemption.
Each will have a stipulate deadline and specific time frame for indicating important submission dates and declaration dates for vacant property tax.
How to make payments for empty home tax?
The empty home tax payment can be made in several ways. You can make the payment through an official government payment gateway or website after making the declaration. You can also make direct payment through mail or physical visit to government offices, banks or selected financial institutions.
Empty home tax exemptions
You might get exempted from paying the empty home tax under the following circumstances.
Death of the registered owner
If a particular property remains unoccupied for six months or more due to the death of the registered owner in the ongoing tax year or the previous period, the vacancy tax gets exempted.
To ensure an exception, you will need to present the death certificate of the registered owner as evidence.
Undergoing major remodelling
If your primary or secondary residence is undergoing major renovation work with appropriate permits, you don’t need to pay vacancy taxes.
As proof of evidence, you need to submit:
- A brief detail of the remodelling project.
- Renovation permit number.
Registered owner undergoing medical treatment
If your property remains vacant for six months or more, and the registered owner is admitted to a hospital or rehabilitation facility for long-term treatment is exempted from paying empty home tax. However, this exemption is limited to two consecutive vacancy years.
The evidence documentation includes:
- Proof of residence and registered ownership before the treatment date.
- Contact details of the treatment facility.
- Confirmation letter from the medical facility confirming the undergoing medical care or supportive treatment.
Property sale or transfer of ownership
When a property’s legal ownership gets transferred as a part of the sales proceeding, the property is given a new land title number.
Evidence includes:
- The certificate of title that clearly mentions the date of title transfer.
- Sales documentation
- Copy of property transfer tax form
Legal order from the court
Some properties cannot be occupied by the registered owner of tenants due to an ongoing court proceeding or legal non-occupancy order. If your property remains vacant due to a court order, an active legal proceeding in the court or a government order prohibiting occupancy, you’re entitled to an empty home tax exemption.
As a part of the evidence, you need to present:
- Copy of the court order or ongoing court proceedings
- A government prohibition order or certificate.
Limited use
Your property remained unoccupied for more than six months due to one of the following limitations:
- Vehicle parking
- Inherent structure, shape or size of the property was improper and adequate residential facilities could not be constructed.
Evidence of documentation includes a land survey or legal documentation that clearly highlights limiting components restricting residential occupancy.
Conclusion
The easiest way to avoid vacancy tax is to find a tenant for secondary properties. You can hire a property management firm to make the tenancy process easier and streamlined. If you are not willing to rent out your property, you can invite any family friends to stay or occupy your property.
You can also renovate and upgrade your property not just to get an exemption but also to attract high-quality tenants in the future. A home equity loan is one of the simplest ways to secure financing for renovating your home.