Taxes can get confusing fast! One of the common costs with property purchases is the property transfer tax (PTT).
Here, we break down everything you need to know about PTT in a simple format. This includes how much it costs, who pays it, and how you can avoid it.
We also cover the new tax exemptions the BC government implemented this Spring. Let's make sure your next real estate transaction is as smooth as possible!
What is Property Transfer Tax in BC?
Property Transfer Tax (PTT) in British Columbia (BC) is a tax paid by the buyer when purchasing real estate. The tax is calculated based on the fair market value of the property at the time of transfer.
Read Also: Which Real Estate Documents Need Notarization?
How Much Is the Property Transfer Tax in BC?
Understanding the property transfer tax rates in British Columbia is crucial for budgeting your home purchase.
The basic rates are straightforward for general property transfer tax:
- 1% on the first $200,000 of the property’s fair market value.
- 2% on the portion of the fair market value greater than $200,000 and up to $2,000,000.
- 3% on the portion of the fair market value greater than $2,000,000.
Additional Property Transfer Tax
For properties valued over $3,000,000, an additional 2% tax applies to the portion exceeding this amount.
Furthermore, foreign entities and taxable trustees face a 20% additional property transfer tax in specific areas, including Metro Vancouver and the Fraser Valley.
Here's An Example For a $1,000,000 Home
To illustrate, if your home is valued at $1,000,000, the property transfer tax would be:
- 1% of $200,000 = $2,000
- 2% of $800,000 = $16,000
- Total Property Transfer Tax = $18,000
Knowing these rates helps you plan and avoid surprises during your property purchase.
Who Pays The Property Transfer Tax in BC?
It's Buyer's Responsibility
In British Columbia, the buyer is responsible for paying the property transfer tax on most property transfers.
When to Pay
The tax is due at the time of property transfer, also known as the "time of conveyance."
Do You Pay Property Transfer Tax (PTT) on New Homes in BC?
Newly Built Home Exemption
Newly built homes under $1,100,000 typically qualify for a full exemption from the property transfer tax.
If the property’s fair market value is between $1,100,000 and $1,150,000, the exemption amount is partially reduced.
Understanding New BC Property Transfer Tax Exemptions
Navigating the world of property transfer tax can be daunting, but knowing about exemptions can save you a significant amount of money. Here's a breakdown of the key exemptions available in British Columbia.
First-Time Home Buyer Exemption
If you’re a first-time home buyer, you’re in luck. You can be exempt from paying property transfer tax on homes valued up to $835,000. This is a substantial increase from the previous threshold of $500,000, potentially saving you up to $8,000.
Even if your new home is valued at up to $860,000, you might still qualify for a partial exemption.
Newly Built Home Exemption
Newly constructed homes also come with their own set of exemptions. Homes under $1,100,000 are eligible for a full exemption.
For homes valued between $1,100,000 and $1,150,000, partial exemptions are available.
Other Exemptions
- Purpose-built rentals
- Transfers between family members
- Transfers due to divorce
- Transfers involving registered charities
- Transfers involving family farms
There are many extra details on qualifying factors for PTT exemptions all found on the Province of BC’s website.
Do You Pay GST on New Homes in BC?
Yes, the Goods and Services Tax (GST) is applicable to the purchase of new homes in British Columbia. Here’s what you need to know:
1. Newly Constructed Homes:
When you buy a newly constructed home, such as a pre-sale condo from a developer or an owner-built detached house, GST at 5% is added to the purchase price. This tax applies to any home that has not been previously occupied or sold.
2. Resale Homes:
For homes that are not brand new and have been lived in, GST does not apply. This is because the GST would have already been paid at the time of the first sale.
GST Rebates for New Homes:
If you are purchasing a new home to live in as your primary residence, you may be eligible for a partial rebate on the GST:
- For homes priced up to $350,000, you can receive a rebate of up to 36% of the GST paid. This effectively reduces the GST rate from 5% to approximately 3.2%.
- For homes priced between $350,000 and $450,000, a partial rebate is available, but it decreases as the price of the home increases.
- For homes priced above $450,000, no GST rebate is available.
3. Substantially Renovated Homes:
Homes that have been substantially renovated, where 90% or more of the interior has been redone, are also subject to GST, as they are considered “new” under tax rules.
4. Rental Properties:
If the home is purchased with the intention of being a rental property, you may qualify for the New Residential Rental Property Rebate, which could allow you to recover some or all of the GST paid.
Want to be Prepared for What the PTT is like on Your Purchase?
Nobody likes tax surprises! That’s why you can use this PTT Calculator tool to avoid this unexpected expense.*
*Quick Disclaimer: This is an estimate and only a tool. Ensure to reach out to a legal professional for accurate PTT amounts, including exemptions and remittances.
Get a Great Notary When You Buy or Sell Residential Property
When buying or selling real estate, having a knowledgeable notary by your side can make all the difference. Here’s why you should contact a notary:
- Ensures all legal documents are correctly prepared and filed.
- Provides peace of mind by handling the complex legal aspects of the transaction.
- Offers expert advice on exemptions and tax implications.
- Streamlines the buying or selling process for a smooth transaction
Read Also: Why Hiring a Notary is Crucial for Legal Documentations?
Visit Us at CH Notary
Reach out to CH Notary in Clayton Heights for great service and always approachable advice.
We're here to help make your real estate transfer as stress-free as possible!