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The-Mortgage-Gal

Exemptions from Spec Tax

The Speculation and Vacancy Tax is front and centre again.

The prominent theme has been around the importance of completing the declaration to exempt yourself from the tax (if applicable).

I’ve also had calls from several people about the assessed values on their second homes.

The information I am relying on comes from the Government of B.C.’s website.

If you owned a home in one of the areas subject to the speculation tax as of Dec.31, 2018, you must complete and submit a form to claim your exemption no later than March 31, or the province will bill you for the spec tax.

People who own residential property within designated taxable regions of B.C. may be eligible for an exemption from the speculation and vacancy tax. 

The speculation and vacancy tax is designed to prevent housing speculation, turn empty homes into good housing for British Columbians, and raise revenue that will go to supporting affordable housing.

Exemptions are available, ensuring that more than 99 per cent of British Columbians are exempt.

If you are not exempt from paying the spec tax, it is important to know that any amounts owing are due and payable July 2. If you do not complete the exemption declaration, you will be billed for the tax.

The province will have a process for correcting this if you are billed for the tax, but should be exempt. Speculation (pun intended) on my part is that for this first year, it will take a while to get errors sorted out in July, so taking the time to fill out the exemption declaration may save you a fair amount of pain and aggravation down the road.

While researching available information, I couldn’t find if the spec tax will be collected with your regular property taxes. My thinking is that when you get your property tax notice in May/June, that it will include the spec tax amount.

The website goes into great detail about all of the exemptions available. It is important to know that if you co-own a property in one of the affected areas each owner fills out a separate declaration.

From the provincial site, here is a breakdown of the exemptions available for individuals:

  • Principal residence exemptions
  • Occupied by a tenant
  • Can’t live in the residence because it’s uninhabitable
  • Secondary residence close to medical treatment facility
  • Just bought or inherited the property
  • Separation or divorce
  • Bankruptcy
  • Recent death of owner
  • Property is in a trust created by a will for a minor
  • Property has rental restrictions
  • Property is a strata hotel
  • Property includes a licensed child daycare
  • No residence on the property
  • Other exclusions from the tax

One concern I have is that people who have their property taxes paid by their mortgage lender may be caught unawares.  Ideally people are opening and responding to incoming mail, but not everyone does.

If you don’t complete the declaration form, you might be in for a nasty surprise in August or September when your lender adjusts the property tax portion of your mortgage payment.

In a nutshell, lenders communicate with the local government office to determine how much you owe for your property taxes each year. At the beginning of July, your lender transfers funds to the city to pay your property taxes.

Your lender will compare how much they paid to the city against how much they collected from you over the year.

They will adjust the tax portion of your mortgage payment; if they didn’t collect enough the previous year your payment will increase a little. If they over-collected your payment will decrease accordingly.

If you do not claim your exemption for the spec tax, you could potentially see your mortgage payment increase by several hundred dollars to account for the new tax. You might not realize this, or you may find out the hard way if you don’t have sufficient money in your account to cover the increased payment.

For people that will not be exempt from the tax, it is important to take a look at your BC Assessment to see if it represents the accurate value of your property. Over the last two years (in Kelowna) many of the  assessed values have been a pretty accurate representation of market value.

This week, I saw an assessment on a condo that had jumped to $424,000. The assessment last year was $339,000. The owners of the unit are residents of another country and will be subject to the spec tax.

We looked at the Sample Sold Properties section on Evalue for their condo, and the highest price for a similar unit in the same complex sold last year was $364,000.

The Sample Sold Properties tab is just above the map, about 2/3 of the way down the page, when you search your property address on the Evalue link. BC Assessment does a great job of posting recent sales.

These clients will be hiring an appraiser and appealing their assessed value.

We are learning about the spec tax as information is released. Key takeaways:

  • If you are exempt from the tax, it is crucial that you take a few minutes to complete the declaration to save yourself frustration down the road.
  • If you are subject to the tax, take a minute to review your assessment to confirm the value is consistent with current market values for your property.

It will be interesting to see how the spec tax affects our housing market and our economy.



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About the Author

Tracy Head and Laurie Baird help busy families find mortgage solutions. Together they have more than 45 years of experience in the mortgage industry.

With today’s increasingly complicated mortgage rules, Tracy and Laurie spend time getting to know the people they work with and help them to better understand the mortgage process. They support their clients before, during, and after their mortgage is in place.

Tracy and Laurie work closely with their clients, offering advice and options. With access to more than 40 different lenders, Tracy and Laurie are able to assist with residential, commercial, and reverse mortgages in order to match the needs of their clients with the right mortgage package.

They work closely with their clients to find the right fit, and are around to provide support for years down the road!

Contact them at 250-862-1806 or visit http://www.okanaganmortgages.com

Visit their blog at https://www.okanaganmortgages.com/blog

 



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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