After finding a pre-sale property you love and securing a mortgage, planning for property taxes can be daunting. However, as a new homebuyer, it’s necessary to know about and important to understand your taxes. While purchasing a pre-sale property can save you in some areas of taxation, there are still others to consider and understand before you close on your pre-sale home.
EXPLAINING PROPERTY TAXES
When you own a property in British Columbia, you are required to submit property taxes yearly to your municipal tax office for each owned home. Property taxes paid by homeowners are used to help fund critical local programs and services like emergency rescue, recreation and community support. This brings necessary funding to police and fire, garbage, road maintenance, community centres, parks, schools and hospitals. These programs build stronger, safer communities that all residents benefit from.
In addition to yearly property taxes, most homes are subject to a property transfer tax, a one-time tax on a purchase. This is where pre-sale homebuyers often come out ahead – pre-sale properties are generally exempt from the property transfer tax, provided the property is priced at less than $750,000.
CALCULATING YOUR PROPERTY TAX
The amount of tax you’ll be asked to pay yearly on your home is based on the funds needed to provide services for the community for the year. Tax rates are set to determine how to share the cost of providing those services. These tax rates, combined with your property assessment, determine how much property tax you pay. Each property is assessed to determine its value, classification and any exemptions. Your assessment significantly influences the amount of yearly property tax you are asked to pay. Every January, BC Assessment will issue you an assessment notice. In most cases, the value established is an estimate of your property's value as of July 1st of the previous year. To determine the value of your property, an assessor compares your property to actual sales in the same area. They will consider location, size, land surface, shape, use, and age and condition of the buildings on the land.
SUBMITTING YOUR PROPERTY TAXES
Your property assessment will also outline the due date for payment. In B.C., property taxes are generally due on July 1st. Payment must be submitted to the office that sent you your property tax notice. Usually, you can pay through online banking, the mail, at City Hall, at your bank or through your mortgage payments. Check with your municipality and the office that issued your tax notice to confirm methods of payments and the timelines along which you must pay.
PRE-SALE HOMES AND PROPERTY TAXES
As mentioned, pre-sale homes are generally exempt from the property transfer tax, provided the property is priced at less than $750,000. Those purchasing a pre-sale home valued between $750,000 and $800,000 are likely qualified to receive a partial exemption on the transfer tax. In order to take advantage of a full or partial exemption, you must purchase your home as an individual (rather than a corporation) and you must be a Canadian citizen or permanent resident. It is worth noting that, despite being saved from property transfer taxes, pre-sale homes are subject to GST and this should be accounted for when budgeting. Homes valued under $450,000 may be exempt from GST, but those purchasing in the Greater Vancouver market know that they are unlikely to qualify for that exemption. As your possession date is not likely to fall directly on July 1st, your first year of property taxes will be pro-rated to account for a reduced year of ownership.
Taxes tend not to be a desirable topic, but pre-sale homebuyers may take solace in the knowledge that their pre-sale purchase will likely save them from a hefty transfer fee. Beyond that, the yearly property taxes that each homeowner is expected to pay contribute greatly to critical infrastructure and support of the community.