Recent changes to the Property Transfer Tax could benefit you

Taxes can be a difficult financial barrier when considering the purchase of your first home. But recently the provincial government announced changes to the Property Transfer Tax (PTT) that could make this easier! Let’s begin by understanding the PTT.

Introduced by the BC Government in 1987, the PTT applies a tax to every real estate purchase or gain on a property that is registered at the Land Title Office. The taxes are calculated based on the property’s purchase price (at fair market value) at a rate of 1% of the first $200,000 and 2% on the remainder of the value. For example, the current MLS composite benchmark price (for all residential properties in Metro Vancouver) is $609,100 which would result in paying $10,182 towards the PTT.

The Change - What are the benefits?

In recent years, the provincial government introduced the First Time Home Buyers’ Program which reduces or eliminates the PTT for those trying to enter the market. The most recent change, which occurred on February 19, 2014, makes a first time home buyer exempt from paying the PTT if the property is valued at $475,000 or less - instead of the previous $425,000 ceiling. Furthermore, if the purchase price is between $475,000 - $500,000, there is still an opportunity to qualify for a proportional exemption.

For example:
    Purchase Price (Fair Market Value) = $475,000
    1% of first $200,000 = $2,000
    2% of remaining Balance ($275,000) = $5,500
    Total PTT exemption = $7,500

How do you qualify?

Qualifying can be a simple process as long as you meet these requirements for the First Time Home Buyers’ Program:

• You are a Canadian citizen or permanent resident (If you become one within 12 months of when the property is registered, you are eligible to apply for a refund of the tax.)
• You have lived in BC for 12 consecutive months before the date of registration, or have filed two income tax returns as a BC resident within the last six years.
• You have never owned an interest in a principal residence anywhere in the world at any time.
• You have not have previously obtained a First Time Home Buyers’ Exemption
• If you are purchasing property with another person, and if only one person qualifies, a percentage of the eligible first time home buyer’s interest in the property will be exempt.

Ask your realtor or mortgage broker to see if you are eligible for this program or any other provincial or federal home purchaser incentives offered. For more information visit www.gov.bc.ca and search “Property Transfer Tax”.
 
Sources: Real Estate Board of Greater Vancouver & Government of British Columbia