When it comes to buying a home, there are a lot of expenses to factor in – from the down payment and mortgage to home insurance and property taxes. In some provinces, such as British Columbia, buyers also have to pay property transfer tax (PTT).
To help you understand this important expense, we’ve put together a brief overview of Property Transfer Tax, when it applies, and what circumstances may warrant an exemption.
What is Property Transfer Tax (PTT)?
Property Transfer Tax (PTT) is a tax levied on the transfer of ownership of real property. The tax is based on the market value of the property being transferred.
How is PTT Calculated in British Columbia?
In British Columbia, the Property Transfer Tax rate is 1% on the first $200,000 of the purchase price, 2% on the portion of the purchase price between $200,000 and $2 million, and 3% on the portion of the purchase price above $2 million.
If the fair market value of the property is more than $3 million, an additional 2% is charged on the portion above $3 million.
Property Transfer Tax Calculator
Property transfer tax
Example of How PTT is Calculated
Let’s say Jake buys a property in British Columbia at the fair market value of $3.5 million. His property transfer tax would be calculated as follows:
- 1% x the first $200,000 = $2,000
- 2% x $1.8 million = $36,000 ($2 million – $200,000 = $1.8 million)
- 3% x $1.5 million = $45,000 ($3.5 million – $2 million = $1.5 million)
- 2% x $500,000 = $10,000 ($3.5 million – $3 million = $500,000)
Adding the taxes from each bracket, we have: $2,000 + $36,000 + $45,000 + $10,000 = $93,000
Therefore, Jake must pay $93,000 in Property Transfer Tax.
When Does Property Transfer Tax Become Payable?
In most jurisdictions, including British Columbia, Property Transfer Tax becomes payable when ownership of a property is transferred from one person to another. At the time of registration, your real estate lawyer is responsible for filing a PTT return and effecting payment to the Land Title Office.
If the return is not filed on time or if the PTT is not paid, the Land Title Office is allowed to refuse to register the property transfer.
Can You Apply for a Property Transfer Tax Exemption?
The good news is that there are several exemptions that can apply, which can significantly reduce the amount of tax payable. For example, if you’re a first-time home buyer, you may be eligible for a full exemption on properties valued at $500,000 or less.
You may still qualify for a partial exemption if you are a first home buyer and the fair market value of the property is less than $525,000.
There are also exemptions available for certain types of properties, such as newly built properties and family farms.
So, if you’re planning on buying property in BC, be sure to review the PTT exemptions that may apply to you:
- Newly Built Home Exemption
- Transfer of Principal Residence Exemption
- Transfer to a Registered Charity Exemption
- Transfer of a Family Farm Exemption
For more information on the eligibility criteria for each exemption, you can visit the British Columbia government website.
If you are looking for representation for an upcoming purchase, sale, or refinance, give us a call today to speak with a conveyancing lawyer from the Solimano Law team. We can assist both buyers and sellers in residential real estate transactions.
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