BC FLIPPING TAX

BC Home Flipping Tax

Disclosure:

The information provided is for general informational purposes only and should not be relied upon as legal or accounting advice. I am not an accountant or legal professional, and this content is intended solely to offer considerations for further discussion. If this situation concerns you, please consult a qualified accountant or legal advisor for professional guidance tailored to your specific circumstances.

Who is subject to the tax?

If a person (which can include an individual, corporation, partnership or trust) sells or disposes of a taxable property on or after January 1, 2025, the profit earned from the sale would be subject to the new tax if the property was purchased less than 730 days before the sale. The seller of the property may be a B.C. resident or a resident anywhere else in the world.

Do I need to file a BC home flipping tax return?

The BC home flipping tax return is separate and distinct from the annual income tax filings.

You must file a BC home flipping tax return within 90 days of the sale, if either of the following applies:

You qualify for the tax, as you sold your property within 729 days of purchasing it and are not eligible for any exemptions
Your exemption applies only after you file a return

How to Calculate the Tax

A) Calculate the Taxable Amount:

Proceeds from the sale of the property minus cost to purchase the property minus cost to improve the property

Proceeds from the Sale:

This is calculated by subtracting the following from the sale amount of the property.

Legal costs
Appraisal costs
Costs for trading services as defined in the Real Estate Services Act
Costs of a home inspection carried out by a home inspector licensed under the Business Practices and Consumer Protection Act
Costs of a survey of any residential property comprising the property

Cost to Purchase:

The cost to purchase a property is equal to the total paid to purchase the property and the following amounts paid in respect of the purchase of the property.

Tax under section 2(1) of the Property Transfer Tax Act, not including interest and penalties
Legal costs
Appraisal costs
Fees for registration under the Land Title Act
Costs of a home inspection carried out by a home inspector licenses under the Business Practices and Consumer Protection Act
Costs of title insurance
Costs of a survey of any residential property comprising the property
Tax under section 165(1) of the Excise Tax Act (Canada)
Costs to obtain documentation required by home insurance providers

Cost to Improve:

You may deduct the following costs of improving the property:

Each outlay or expense that is an improvement of an enduring nature
The cost of any range, refrigerator, washing machine, dryer or other major appliance that you replaced and is included in the property sale
Costs to assess the feasibility of constructing or placing a new housing unit on the property
Costs to assess the feasibility of undertaking a substantial renovation of an existing housing unit that is part of the property

You may not deduct the following costs of improving the property:

Costs of annual, recurring or routine repair, maintenance or service
Financing costs of an improvement
Financing costs of a major appliance

B) Calculate Your Net Taxable Income (primary residence deduction):

If the property is your primary residence, which means that you lived in as your primary residence during the period you held the property and you owned the property for at least 365 consecutive days before you sold it, you may be eligible to also claim a primary residence deduction ($20,000 multiplied by your percentage of ownership).

Your net taxable income is calculated as:

Your taxable income less your primary residence deduction

C) Calculate Your tax rate:

If you own the property for less than 366 days, the tax rate is 20%.

If you own the property for more than 365 days and less than 730 days, the tax rate is reduced until it reaches zero according to the following formula:

Tax rate = 20% × [ 1 - ( (Days held - 365) / 365) ]

If you own the property for more than 729 days, you are not subject to the BC home flipping tax.

The Flipping Tax owed is your tax rate multiplied by "Net Taxable Income".

Exemptions that require filing a return

The following exemptions are only available if you file a BC home flipping tax return:

Life circumstance exemptions
Exemptions for builders, developers, and building or renovating related activity
Exemptions for property sales between related persons
Exemptions without filing a return

Exemptions that DO NOT require filing a return

Some groups are always exempt from the BC home flipping tax. If you fall under any of the following categories, you do not need to file a return to be exempt from the tax when you sell your property:

Your property is in an exempt location
You are an exempt entity
You acquired the property as a beneficiary of a real estate investment trust
You used your property exclusively for a commercial purpose

Exempt Property Locations and Entities

Leased lands
Most if not all residential property on First Nations Lands