On January 1, 2025, the B.C. government’s newest Homes for People Plan initiative, a house flipping tax, came into effect. The new tax is applicable to properties sold in BC after less than two years of ownership, subject to certain exemptions.
Imposed by the Residential Property (Short-Term Holding) Profit Tax Act (the “Act”), taxes owing from flipping a house can be as high as 20% of the profit if sold less than a year after acquisition. The house flipping tax applies to properties that were acquired at any time, meaning that even those houses purchased before January 1, 2025, are subject if sold before two years of ownership have elapsed.
Certain properties and circumstances are exempt from the tax, such as properties on First Nations reserve lands and transactions resulting from either divorce or the distribution of an estate, foreclosure sales and certain circumstances encountered in a development context. Certain exemptions apply automatically without the need to file a return, while others are only applicable after they are declared on a return. Homeowners should be prepared to corroborate their claim of any exemption, per the Act.
A seller must file a tax return within 90 days of their sale if:
- The property was owned by the seller for less than two years, or
- The seller is claiming an exemption which must be declared on a tax return.
Homeowners are cautioned to ensure immediate compliance with this new tax, as being found to have committed an offence under the Act can result in fines ranging from 50% to 200% of the tax that was owed as well as up to two years of jail time if the offending homeowner is an individual. Penalties may also be levied against homeowners for failure to file, which escalate with ongoing failure and are calculated in accordance with the Act.
Homeowners should speak to an experienced real estate lawyer for advice on calculating how long they have owned their homes for as well as qualifying for deductions or exemptions from the tax.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.
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