Tax Benefits Available For Real Estate Investing in BC
Real estate is booming across southern Vancouver Island, and opportunities for real estate investment are enticing new and seasoned buyers into the market. Real estate is the most common type of large investment and is the optimal way to diversify your portfolio. Whether you’re looking for a short-term investment, long-term recurring revenue, or a stable personal investment that you and your family will reside in, several tax benefits are available. Here are a few key tax benefits of real estate investing.
First-Time Home Buyers’ Tax Credit (HBTC)
One of the most popular tax benefits for newcomers to real estate investing is the federal tax credit for first-time home buyers. The HBTC is available to first-time homebuyers who purchase a home in Canada and meet basic eligibility criteria, including registering the home in their name and personally occupying the home as their primary residence within a year of purchase. This real estate tax benefit provides first-time home buyers with up to $750 in non-refundable tax credits.
GST/HST New Housing Rebate
New home construction is a great financial investment for a number of reasons. Not only do you save on renovation costs, but you can also take possession soon after closing the deal and eliminate carrying costs. All real estate transactions in Canada are subject to GST or HST. However, newly-constructed homes may be eligible for the federal GST/HST New Housing Rebate. This real estate tax benefit in Canada entitles buyers to claim a GST/HST rebate if the home was purchased for less than $450,000.
Expense Claims from Rental Property Income
If you’re looking to invest in property that you will rent out to generate income, you will be subject to federal and provincial taxes on that income. However, since the property is not your primary residence and you are using it for investment and income purposes, eligible expenses can be claimed on your personal taxes. Keep track of any costs incurred by exterior or interior maintenance, repairs, or renovations, as well as administrative costs such as insurance, accounting, and legal fees.
Property Transfer Tax Rebate
Property sales in most Canadian provinces are subject to property transfer taxes. In BC, there are rebates available for a portion of the tax. Specific eligibility criteria to apply for the rebate include Canadian citizenship or permanent residency, provincial residency within the previous 12 consecutive months, personal occupation of the home as your primary residence within 92 days of purchase, and a purchase price of under $500,000. Homes valued between $500,000 and $524,999 may be eligible for a partial rebate for first-time home buyers. Buyers may also be eligible for the Newly Built Home Exemption if they purchase a newly constructed home. This rebate allows buyers to eliminate or reduce their property transfer tax up to a maximum of $750,000 for full exemptions and $800,000 for partial.
Capital Gains Tax Exemption
When property owners in Canada sell their real estate holdings for profit, those profits are subject to the federal Capital Gains Tax. The most effective way to eliminate that tax is to make that home your primary residence. If the home is your primary residence at the time of sale, you are exempt from paying capital gains taxes if that was your only designated residence in that tax year. If you own a building with multiple units and you move into one of the units and declare it your primary residence, you may be eligible to receive a tax exemption on that portion of the property.
Are You Interested in Real Estate Investment Opportunities?
Whether you’re looking to invest in a primary residence or rental property, I understand what buyers are looking for and what it takes to make a profitable sale in today’s market. As a seasoned real estate advisor, I am familiar with current real estate trends in Victoria, Cowichan Valley, and the South Island’s Westshore communities. Contact me today for more information about exciting real estate investment opportunities.