Although this tax has been around for a long time here in BC, there is still a lot of confusion around it. Many people are confused about what it actually is, why they have to pay it and in what cases they don’t have to pay it, and above all, how much they have to pay.
Let’s start with how much?
Well in BC, we use a simple rule of thumb depending on the value of the property: 1% of the first $200,000, (so $2,000) and 2% of the balance.
So let’s say you are buying a $400,000 property, the property transfer tax would be $6,000. So, in addition to your down payment, and appraisal and legal fees, you have to allot for an additional $6,000 as part of your closing costs.
So when do you NOT have to pay for it? Well if you happen to be a first time home buyer and the property value is below a certain threshold, then you qualify for an exemption to the property transfer tax (PTT).
Even if you are a first time buyer and you purchase a home over $425,000 you will be required to pay all, or at minimum, a portion of Property Transfer Tax.
Basically, at any value above 425,000, you have to pay the Property Transfer Tax, but there is a sliding scale between 425,000 and 450,000.
If your home is over $425,000, you will be paying the full amount of Property Transfer Tax. If it costs between 425,000 and 450,000 then it gets even more confusing because it works like a sliding scale amount. Contact me for more details if this applies to you and we can set up a time and go over the details.
Simple rule of thumb, If you purchase a house under $425,000 and you are a first time home buyer, and you have never had your name on the title of a home anywhere across Canada, then you will not have to pay Property Transfer Tax this one time.
REMEMBER, this is to do with your primary residence only. Even if you are a first time home buyer, but you are buying a rental property, for whatever reason, you may be living at home still, or it might make more sense for you to rent, you HAVE TO pay the Property Transfer Tax on that rental property,
So you have to pay the property transfer tax if it’s your first purchase but it’s a rental. But don’t worry, when you go to buy your first owner occupied property, you are still eligible for the property transfer tax exemption.
As for the reason behind the Property Transfer Tax. Well it was supposed to be temporary (like all taxes are introduced as) What it really is is a tax for exchanging title of a property, taking one name off and putting another on.a pretty easy source of additional revenue for the provincial government, albeit a little pricey in my opinion.
There has been talk of the $425,000 threshold for first time home buyers being increased, and I tend to agree, especially in the lower mainland where $425,000 hardly gets you into a small condominium anymore.
If you or someone you know is buying with a friend or a spouse and one of you is a first time home buyer and the other is not (I just came across a similar situation last week), and you’re wondering what you can do minimize your property transfer tax obligations, give me a call and we can go over some options.
It’s Aleem Peermohamed the Burnaby Mortgage Specialist – Property Transfer Tax (PTT) BC.
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