What are the taxes related to real estate in Canada?

It is said that Canada is a "country of ten thousand taxes". You have to pay taxes when shopping and eating. Buying a house is such a large investment, and naturally you have to pay a lot of tribute to the government. Fortunately, Canada's tax system is quite sound. While collecting taxes, the government also provides corresponding "tax credits" and "exemptions" policies for first-time homebuyers and some low-income families.

What taxes are payable when buying and selling a house?

Land transfer tax

One of the most troubled taxes in Toronto in recent years is the land transfer tax. If you want to buy a house in Toronto, you must pay both the Ontario Land Transfer Tax and the City of Toronto Land Transfer Tax.

Both provincial and municipal land transfer taxes adopt a progressive tax rate. The specific calculation method of Ontario's land transfer tax is as follows:

For parts with a selling price of less than 55,000, the rate is 0.5 % transfer tax is levied, which is 275 yuan;

The part with a selling price between 55,000 and 250,000 is taxed at 1%, which is 1,950 yuan;

The price is above 250,000 yuan The portion is taxed at 1.5%.

If the property is a semi-detached house or a detached house with less than two units, the tax calculation is slightly different:

For the part with a selling price of 250,000-400,000, it is calculated as 1.5 % tax, that is, 2,250 yuan;

The portion of the sales price exceeding 400,000 yuan is taxed at 2%.

In other words, when purchasing a detached house priced at $500,000, the Ontario land transfer tax to be paid is $6,475 (275+1,952,252,000).

The calculation method of land transfer tax in the City of Toronto is as follows:

For the portion sold for less than $55,000, a transfer tax of 0.5% is levied, which is $275;

The portion with a selling price between 55,000 and 400,000 is taxed at 1%, which is 3,450 yuan;

The portion with a selling price between 400,000 and 40 million is taxed at 1.5%, and the portion exceeding 40 million is taxed at 1.5%. Still taxed at 1%.

If the property is a semi-detached house or a detached house with less than two units, the portion exceeding RMB 400,000 is taxed at 2%.

For a detached house worth $500,000, the Toronto land transfer tax that needs to be paid is $5,725 (275+3,452,000).

Calculated in this way, if you want to buy a 500,000 detached house in Toronto, the land transfer tax alone will reach 12,200 yuan. If a home buyer chooses to buy a property in the 905 area of ??the GTA, he only needs to pay the Ontario land transfer tax and does not need to pay the municipal land transfer tax. Therefore, in the past two years, calls for the City of Toronto to abolish the land transfer tax have become increasingly louder.

It should also be reminded that first-time home buyers can enjoy certain land transfer tax discounts, with a reduction of up to 2,000 Canadian dollars.

Sales Tax

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Everyone should be familiar with it. Almost any consumption in Canada must pay HST, with only a few exceptions in some provinces. It is worth noting that HST is not required for the purchase and sale of second-hand houses. However, buyers and sellers must pay HST on various service fees

related to the real estate transaction. In other words, the seller needs to pay HST for attorney fees, broker commissions, moving expenses, etc., and the buyer has to pay HST for home inspection fees, attorney fees, appraisal fees, mortgage default insurance, etc.

Buyers of new homes must pay 13% HST, but in order to appease consumers, the government provides a tax rebate of up to 24,000 for prices below 400,000.

Capital appreciation tax

For Canadian residents, the main residence is exempt from paying capital appreciation tax when paying taxes. However, investors or non-residents must pay tax on the increase in value of the property.

The problem of huge amounts of real estate value-added tax mostly occurs when children inherit the real estate of their parents during their lifetime. If Pi's parents bought a country villa for 30,000 yuan when they were young, and now it has appreciated to 1 million yuan, the heir will face an asset appreciation of 970,000 yuan. He needs Paying 23% tax on the value-added part is indeed a considerable expense.

Many heirs had to put their properties up for sale because they were unable to pay taxes.

We can provide you with two solutions to this huge asset appreciation tax problem caused by inheritance: one is to buy a life insurance that covers the property appreciation tax; Sell ??it to your heirs as soon as possible before the price goes up that horribly.

Real estate tax during the holding period

Houses in Canada are freehold properties, but you need to pay property tax every year while holding the property. The local government will assess the property every year and charge property tax based on the assessed amount. The tax depends on the location and property. The property tax rate for Toronto residential properties in 2013 was about 0.75%.

These items can be tax deductible

Rental properties are tax deductible

You can run the house rental as a business, and the things that happen during the operation Many related costs and expenses can be deducted from taxes. That is to say, the remaining amount after deducting tax-deductible expenses from rental income is your taxable income.

In Canada, rental expenses that can be used for tax deduction include the following items:

1. Interest

Interest expenses are usually various expenses of the rental owner One of the most important tax-deductible expenses. Generally speaking, interest expenses that can be used for tax deduction include: interest on mortgage loans for purchasing rental properties, interest on loans used to renovate rental properties, and interest on credit card consumer loans generated for goods and services provided for rental properties.

It is worth noting that there is no such tax benefit for properties used for self-occupation, which means that the mortgage interest on the self-occupied home cannot be used to deduct taxes. Therefore, those owners who want to buy two houses at the same time, one to live in and one to rent out, can do something about this. With the same interest rate, increasing your rental loan amount will allow you to get more tax deductions.

In another situation, if you accidentally win a bonus of 300,000, you want to use the money to invest in a rental house. At the same time, you still have 300,000 in your own house. The loan was not paid off. The best way at this time is to use the 300,000 yuan windfall to pay off the loan for your home, and then apply for a bank loan to buy a rental house. This will allow the interest to enjoy tax deduction benefits.

2. Real estate tax

If you sublet part of the space in your home to others, you can apply for a partial property tax deduction based on the proportion of the sublet area to the entire residence. buckle. If an independent second suite is rented out, the property tax can be fully deducted.

3. Maintenance and repair costs

Various expenses incurred during the maintenance of the rental house (normal and necessary expenses, the total repair price is within a reasonable range) can be included in the expenses The tax will be deducted in full in the year in which it occurs. For example: the cost of repainting, repairing gutters and floors, repairing roof leaks, plastering and replacing broken doors and windows.

4. Travel expenses

All reasonable transportation expenses incurred due to rental activities can be tax deducted from the rental income.

5. Water, electricity and heating bills

6. Office expenses

If you work at home and handle property rental matters, these expenses can also be taxed. Deductions and exemptions from the payment.

7. Salary expenses

If you hire certain people to assist you in completing leasing matters, then the wages and welfare expenses you pay to them can also be included in the tax payable Make deductions.

8. Accident or theft losses

It should be noted that the deduction limit does not cover the entire loss amount. The amount that can be deducted will depend on the extent of the loss and the extent of the insurance claim.

9. House insurance

Tax deductions are basically available for all types of insurance purchased for rental properties, such as fire insurance, theft insurance, flood insurance, homeowners insurance, etc. If you also hire others to assist with leasing matters, the employee's medical insurance and compensation insurance costs may also be deducted.

10. Legal and other special service fees

Fees paid to lawyers, accounting and real estate management companies, real estate investment consultants and other professionals incurred due to leasing can also be It is treated as an operating expense and is deducted from tax deductions.

In addition, the management fees of ***tube apartments and townhouses, advertising expenses and other expenses incurred for advertising rental housing are also within the scope of deduction.

Tax deduction for buying a house when filing tax return

Starting from 2009, if you meet the following conditions, you can enjoy a tax deduction of 750 yuan (5,000×15%) for buying a house:

1. The applicant and his spouse have no real estate in their name in the current year and the previous 4 years;

2. In the current year, they purchased existing or under-construction houses, townhouses, apartments and Mobile homes, etc.;

3. If there is a disabled person in the family and the house purchased can bring convenience to them, they are not subject to the first-time home purchase conditions (i.e. Article 1).

Real Estate Tax Subsidy for Seniors

In order to help middle- and low-income seniors over 64 years old bear the property tax for their own homes, Ontario has introduced a property tax subsidy for elderly homeowners. discount. During the annual tax filing season, eligible seniors who apply for this subsidy can receive up to an additional CAD 500.

This subsidy is paid annually and to receive this subsidy, an income tax and allowance return must be completed. A couple can only apply for one subsidy.

The amount of the subsidy is determined by income. For example, a single elderly person with an income of less than 35,000 yuan can receive a full subsidy of 500 yuan if the property tax is more than 500 yuan; if the income is between 35,000 and 49,985 yuan, the subsidy amount will be reduced accordingly; If it exceeds 49,985 yuan, it will not meet the subsidy conditions.

Energy and Property Tax Credits

Ontarians who own or rent a home can receive up to $900 in Ontario Energy and Property Tax Credits, with seniors receiving up to Claim the $1,025 credit.

Renovation tax credits

In order to encourage owners to update and upgrade their houses and create an environment that consumes less energy and makes them more comfortable to live in, the government often launches some renovation tax credits from time to time. However, it should be noted that these benefits are usually limited-time and are not tax credits that can be enjoyed year-round.

Last year, Ontario launched a "Healthy Home Decoration Tax Incentive Plan". The plan stipulates that if residents of this province modify their homes to make it easier for the elderly to live in, they can receive a personal income tax deduction for 15% of the modification costs.

Usually, eligible residents only need to keep the relevant renovation receipts to get the credit discount when filing taxes.

Moving expenses are also tax deductible

On average, Canadians move once every five years, and the expenses incurred when moving can sometimes be tax deductible.

Generally, if you move at least 40 kilometers away to start a new job, new business, or attend a new school, you can deduct your moving expenses. .

The moving expenses that can be reported

generally include the following: travel expenses, such as reasonable meals, transportation and accommodation expenses incurred by family members moving to a new residence; storage fees; Temporary board and lodging expenses (up to 15 days); fines for canceling the lease;

costs of selling the old residence; attorney fees, etc. In addition, mortgage interest, property taxes and insurance during the vacancy period before the old residence is sold can also be deducted, with a maximum limit of 5,000 yuan. If your employer reimburses you for part of your moving expenses, you must report that portion of the reimbursement to your income and then deduct the entire moving expenses.

(Source: Toronto Real Estate)