If you are thinking of buying a BC vacation property here are some things to be aware of.
provincial property transfer tax
The Property Transfer Tax (PTT) is charged whether you buy undeveloped land, a second home, a strata property or fractional ownership.
Even if you have never owned a home before, you won't qualify for the First Time Home Buyers' Exemption Program because the home isn't your principal residence.
vacation homes as rental properties
- If your plans are to rent out the vacation property, make sure rentals are permitted. Stratas may not allow rentals as outlined here.
- Some municipal bylaws also restrict rentals and impose specific conditions. For example, Whistler has Temporary Tourist Accomodation Regulations. Check to see if rentals are permitted using Whistler's GIS mapping system.
There are significant tax differences between:
- occasionally renting a vacation property such as a cottage; and
- buying a vacation property as an investment property to rent.
You must keep detailed records and receipts to document net rental income (revenue less expenses).
Expenses could include advertising the rental property, cleaning, maintenance, repair, utilities, property taxes, property management, insurance and accounting fees.
You may also have to register for a GST number since the GST applies to rentals. For detailed information, read this Canada Revenue Agency (CRA) information.
If your using a property as an investment, you may be eligible to claim the Capital Cost Allowance (CCA) for rental property.
You may also be eligible for a GST/HST new residential rental property rebate.
As property owners, you must complete Form T776, Statement of Real Estate Rentals and, if applicable, Rental Losses.
Federal Capital gains tax
As property owners, you must pay Capital Gains Tax on a second property (non-principal residence) when the property is sold or transferred.
For example, if you buy a Whistler townhome for $500,000, and a decade later the property is valued at $750,000 when you die, the capital gains is $250,000. Half of that amount, or $125,000, is taxable.
However, if your spouse is still alive, ownership can be transferred to him or her. Know as a spousal rollover, this transfer can delay capital gains taxes.
If you plan to build a vacation home, you should check the local municipality zoning regulations and future development plans.
If you plan to buy a property in a remote area, you should be clear about where you get services such as electricity and water. With BC becoming drier, relying on a well might not be the best option.
Vacation property buyers should seek professional advice from Revenue Canada. They can be reached at 1-800-959-8281.
(Source of Photo & Text: Real Estate Board of Greater Vancouver)