B.C. Real Estate: Changes Made to the First Time Home Buyers’ Program for 2014
The BC Government recently released it’s 2014/2015 Budget and in that Budget changes were made to the First Time Home Buyers’ Program. The main change was to Property Transfer Tax and the exemption threshold which was increased to $475,000 from $425,000. This change applies to all registrations on or after February 19th, 2014. I have included information below regarding the First Time Home Buyers’ Program and how it works. It is always important to talk to your mortgage broker about this program to ensure that you do qualify for the exemption if you are a first time home buyer.
Information about Property Transfer Tax and the First Time Home Buyers’ Program (from BC Government Website)
The First Time Home Buyers’ Program reduces or eliminates the amount of property transfer tax you pay when you purchase your first home. If you qualify for the program, you may be eligible for either a full or partial exemption from the tax.
If one or more of the purchasers don’t qualify, only the percentage of interest that the first time home buyer(s) have in the property is eligible.
For example, if you qualify and purchase a property with a fair market value (see below) of $400,000 with a person that doesn’t qualify you would still qualify. If you owned a 60% interest in the property, 60% of the tax amount would be eligible for the exemption.
Qualifying for the Exemption
- be a Canadian citizen or permanent resident
- have lived in B.C. for 12 consecutive months immediately before the date you register the property or filed at least 2 income tax returns as a B.C. resident in the last 6 years
- have never owned an interest in a principal residence anywhere in the world at any time
- you have never received a first time home buyers’ exemption or refund
and the property must:
- be located in B.C.
- only be used as your principal residence
- have a fair market value (see below) of:
- $475,000 or less if registered on or after February 19, 2014
- be 0.5 hectares (1.24 acres) or smaller
You may qualify for a partial exemption (PDF) from the tax if the property:
- has a fair market value less than:
- $500,000 if registered on or after February 19, 2014
- is larger than 0.5 hectares
- has another building on the property other than the principal residence
If you don’t qualify because you are not a Canadian citizen or permanent resident, but you become one within 12 months of when the property is registered, you may apply for a refund of the tax. To apply for a refund call (250) 387-0604.
Fair Market Value
Fair market value is the price that would be paid by a willing purchaser to a willing seller for a property (land and improvements) in the open market on the date of registration.
Open Market Transfers
A property transfer is considered to be in the open market when anyone likely to be interested in purchasing the property can make an offer. For example, the seller lists the property with a realtor or advertises it for sale.
The purchase price is considered the fair market value in most cases as long as you register the property within a few months of signing the sales contract. Otherwise, you will need to verify that the purchase price is fair market value if:
- there was a significant change in value
- the condition of the property changed
- you didn’t purchase the property in the open market
Non-Open Market Transfers
When a property transfer doesn’t take place in the open market, fair market value may be determined using other means such as:
- a recent independent appraisal, or
- the property valuation provided by BC Assessment
Generally, the property valuation provided by BC Assessment reflects your property’s fair market value as of July 1 of the previous year. For example, the 2013 roll value reflects market conditions at July 1, 2012. This means that the assessed value may not reflect the current fair market value of your property.
The current property valuation provided by BC Assessment can’t be used in certain cases, such as when:
- changes have been made to the property (e.g. rezoning) since the assessment
- market conditions in the area of the property have changed since the assessment
- the land is classified as farm land (class 9)
- new or additional construction has been completed